Công văn 763/CV-KTTC

To: Credit institutions

In accordance with paragraph 2, Article 13 of the Regulation on lending by credit institutions to customers issued in conjunction with the Decision No. 1627/2001/QD-NHNN dated 31 December, 2001 of the Governor of the State Bank of Vietnam, the State Bank of Vietnam provides guidance on the accounting of overdue debts at credit institutions as follows:

1. Accounting in case of adjustment of the repayment period of principals or interests; or rescheduling of principal and interests.

If customers fail to repay principals or interests by the repayment date and the repayment period is adjusted or rescheduled by credit institutions: the credit institutions shall open a book for following up or apply appropriate statistic method for accurate, timely following up of principals and interests which have been adjusted or rescheduled, in order to satisfy information, report requirements provided for by the State Bank of Vietnam (if any) and to meet managerial requirements, conditions, characteristics of their organisations.

2. Accounting of overdue debts

If customers fail to repay principals or interests by repayment date and the repayment period is not adjusted or rescheduled, credit institutions shall classify the total outstanding loans as overdue: The accounting entries shall be made as follows:

Debit: Account "Overdue debts"

Credit: Appropriate lending account

Credit institutions shall open a book for following up or apply appropriate statistic method to follow up and calculate interests in respect of due outstanding principals for the period during which the customers fail to repay and the outstanding principals which are not due but must be classified as overdue.

- Treatment and accounting of borrowing interests:

+ If customers fail to duly pay the interests of loans:

Entry to the account " Lending interests which are not yet collected " the amount of interests of loans which customers fail to pay.

+ In respect of credit institutions which account for the collection of interests by the method of interests expected to collect: receivable interests of loans which are classified as overdue shall be accounted in accordance with current provisions of the financial Regime and the methodology of calculation and accounting for interests collection applicable to credit institutions. If a reduction of collection is to be made, the accounting entries shall be made as follows:

Debit: Account "Collection of lending interests"

Credit: Account "Appropriate estimated accumulated interests"

At the same time, following off-balance sheet entry is made:

Entry to the Account "Lending interests which are not yet collected" the amount of lending interests which must be reduced since the loan is classified as overdue.

3. Accounting of overdue debts which are reclassified as current debts

- Right after the principals and interests which have become overdue or due (if any) have been paid in full, credit institutions shall reclassify the remaining outstanding debt which has been classified as overdue as current debt:

Debit: Appropriate lending account

Credit: Account "Overdue debts"

- Treatment and accounting for borrowing interests:

+ In respect of borrowing interests that customers have paid, following accounting entries shall be made:

Debit: Appropriate account (deposit, cash)

Credit: Account "Collection of lending interests"

The account "Lending interests which are not yet collected" is reduced by the amount of lending interests that the customers have paid.

In respect of credit institutions which account for the collection of interests by the method of interests expected to collect, receivable interests of loans which have been reclassified as current debts and for which a reduction of collection has been made, accounting entries are made as follows:

Debit: Account "Appropriate estimated accumulated interests"

Credit: Account "Collection of lending interests"

At the same time, following off-balance sheet entry is made

The account "Lending interests is not yet collected" is reduced by the amount of lending interests that have been previously reduced

4. The application of interest rate; timing of accounting for overdue debt and making provisions for risks arising from overdue debts shall be complied with current provisions and guidance of the State Bank of Vietnam.

During the process of implementation, the credit institutions shall be requested to report to the State Bank of Vietnam (Accounting and Finance Department) any obstacle for the timely guidance, settlement.