The State Bank of Viet Nam (SBV) recently issued Circular No. 43/2014/TT-NHNN (December 25, 2014) on lending in foreign currency by credit institutions and foreign bank branches to residents. The circular applies to credit institutions and foreign bank branches authorised to conduct foreign-exchange activities and lending foreign currency to Borrowers (Lender), and residents borrowing from Lenders (Borrowers).

1. Borrowing in foreign currency

(1) The Lender is entitled to decide to provide loans in foreign currency (Loan) for the following capital needs:

(i) Short-term, medium-term and long-term Loans to make offshore payment for import of goods and services. The Borrower must have sufficient foreign currency revenue from production or business to repay the Loan;

(ii) Short-term Loans of petroleum-import enterprises assigned by the Ministry of Industry and Trade and having a 2015 petroleum-import quota. These are to make offshore payment for imports until December 31, 2015;

(iii) Short-term Loans to meet domestic capital needs for production or business plans for export of goods via Vietnamese border gates. The Borrower must have sufficient foreign currency sources for repayment. This provision is implemented until December 31, 2015; and

(iv) Loans for direct offshore investment in important national projects or works. The investment policies must have been approved by the National Assembly, Government or Prime Minister and the Ministry of Planning and Investment issued offshore investment certificates.

(2) Besides the above lending, the Lender may evaluate and decide to lend in foreign currency in priority sectors and sectors in production or business developments that are encouraged under government regulations after obtaining SBV written approval.

2. Obtaining SBV approval of providing Loan

(1) The Lender wishing to provide the Loan in the above section 1.(2) must send SBV a written request for approval including the following contents:

(i) The Lender has evaluated the Loan and ensures that the project is feasible; and the Borrower satisfies borrowing conditions, and is able to return the Loan on time;

(ii) The specific items which the Lender has evaluated and decided to provide the Loan: the Borrower's foreign currency capital needs to implement production or business project in priority sectors or sectors that production or business developments are encouraged under governmental regulations; the amount of the Loan; the Borrower's current financial status, production or business status, sources for repayment, and other items to ensure that the project is feasible and the Borrower satisfies borrowing conditions;

(iii) The Lender must specifically report on its own foreign-currency sources, undertake and ensure balancing of its foreign currency sources as appropriate for the term and amount of the Loan; and

(iv) The Lender undertakes to be responsible for the results of its evaluation and decision to provide the Loan, and the information provided in the request.

(2) Based on the Lender's request, SBV must consider and approve on the basis of the governmental regulations on priority sectors and sectors that production or business developments are encouraged, on the basis of foreign currency market developments and the objectives of currency policy operations.

(3) SBV must provide the Lender a letter approving or refusing to approve the Loan within a maximum of 30 business days after receipt of the request.

Lenders' obligations. The Lender must ensure balancing of foreign currency sources as appropriate for the term and amount of the Loan and also for selling the same to the Borrower to repay the Loan when the Borrower has insufficient lawful foreign currency revenue to repay the Loan. Additionally, the Lender must provide monthly reports to SBV on the Loans on or before the twelfth day of the following month.

The Circular takes effect on 1 January 2015 and replaces SBV Circular No.29/2013/TT-NHNN (6 December 2013).

MAI COUNSEL

VNS