Công văn 1576/NHNN-CSTT

At the request of credit institutions, foreign bank branches and branches of the State Bank of Vietnam in provinces or cities at training conferences for implementing the Circular No. 39/2016/TT-NHNN dated December 30, 2016, the State Bank of Vietnam hereby gives guidance on certain contents prescribed in the Circular No. 39/2016/TT-NHNN prescribing lending transactions of credit institutions and foreign bank branches to customers at the Table of answers to questions concerning the Circular No. 39/2016/TT-NHNN enclosed herewith./.

TABLE OF ANSWERS TO QUESTIONS CONCERNING THE CIRCULAR NO. 39/2016/TT-NHNN DATED DECEMBER 30, 2016 PRESCRIBING LENDING TRANSACTIONS OF CREDIT INSTITUTIONS AND FOREIGN BANK BRANCHES TO CUSTOMERS

(Enclosed with the Official Dispatch No. 1576/NHNN-CSTT dated March 14, 2017)

1. Article 1. Scope and regulated entities:

Question 1: Does the Bank for Social Policies belong to the scope of regulation of the Circular No. 39?

Answer: The Bank for Social Policies is not subject to the scope of regulation of the Circular No. 39; lending transactions of the Bank for Social Policies are performed under regulations in Prime Minister’s Decisions and/or Government's Decrees.

Question 2: Are lending transactions of branches of Vietnamese credit institutions which are established and operate in foreign countries governed by the Circular No. 39?

Answer: Lending transactions of branches of Vietnamese credit institutions which are established and operate in foreign countries are not governed by the Circular No. 39.

2. Article 2. Interpretation of terms

Question 3: Clause 3 Article 2 of the Circular No. 39 stipulates that customer performing a borrowing transaction with a credit institution refers to any legal entity or individual. How can other entities in need of borrowing money other than legal entities such as artels, household businesses or private enterprises apply for loans?

Answer: Clause 3 Article 2 of the Circular No. 39 stipulates that customer performing a borrowing transaction with a credit institution refers to any legal entity or individual; this regulation is conformable with regulations on entities participating in civil transactions in the Civil Code in 2015. Credit institutions shall consider lending money to entities other than legal entities as lending money to individuals (one or several individuals) in conformity with regulations in the Circular No. 39 and the Civil Code in 2015.

Question 4: Clause 4 Article 2 of the Circular No. 39 stipulates that loan for personal or living expenses (consumer loan) refers to a credit institution's granting a loan to an individual customer’s demands for borrowed funds to pay consumption or living expenses for his/her personal or family purposes. How can family relationships be determined?

Answer: Pursuant to regulations in Clause 2 Article 3 of the Law on Marriage and Family, family means a group of persons closely bound together by marriage, blood ties or raising relations, thus giving rise to obligations and rights among them as prescribed in the Law on Marriage and Family. Accordingly, credit institutions should apply regulations of the Law on Marriage and Family to determine family relationship of an individual and consider granting a loan to him/her to pay consumption or living expenses for his/her personal or family purposes in an appropriate manner.

Question 5: Does loans for living expenses include the loan which is applied for to prove an individual's financial capacity when he/she carries out procedures for study or medical treatment abroad?

Answer: Demands of borrowed funds to prove the financial capacity of an individual when applying for study or medical treatment abroad refer to loans where borrowed funds shall be deposited at credit institutions to obtain documentary evidence of that individual’s financial capacity, not to directly cover his/her costs of study or medical treatment abroad. Hence, loans granted in this case are not considered as loans for living purposes under regulations in the Circular No. 39.

Question 6: With respect to the application for a loan for living purposes, does the plan to use a borrowed fund need to have information about the plan to use a borrowed fund for personal or living purposes?

Answer: Pursuant to regulations in Point c Clause 6 Article 2 of the Circular No. 39, plan to use a borrowed fund is a collection of information about use of the borrowed fund by a customer, including at least the information about business plan or project (not applicable to the demands of borrowed fund for living purposes). Accordingly, if a customer applies for a loan for personal or living expenses, his/her plan to use a borrowed fund shall not include information about the plan to use borrowed fund for personal or living purposes.

Question 7: Point a Clause 10 Article 2 stipulates that adjustment to a repayment period is defined as a credit institution's agreeing to extend the agreed period of repayment of loan principal and/or interest in part or in full (including cases in which there is no change to the number of agreed repayment periods) while the loan term is kept unchanged. Accordingly, if a customer adjusts the repayment date (there is no change to the number of repayment periods and the phasing of repayment period) with the new repayment date shorter than the former one and no repayment period is cut, is such customer required to make adjustment to a repayment period?

Answer: Pursuant to regulations in Point a Clause 10 Article 2, if a customer adjusts the repayment date, e.g. from the 10^th day every month to the 05^th day every month, without any change to the number of repayment periods, he/she must not make adjustment to a repayment period.

3. Article 7: Eligibility requirements for a loan

Question 8: Pursuant to regulations in Clause 5 Article 7 of the Circular No. 39, if a customer applies for a loan to finance agricultural activities from a credit institution on which the interest rate is prescribed by Clause 2 Article 13 of the Circular No. 39, it must be rated transparent and healthy in its financial status by a credit institution. If a customer fails to prove that he/she is transparent and healthy in his/her financial status but satisfies all of other eligibility requirements for a loan, may a credit institution grant a loan to him/her according to the agreed interest rate under regulations in Clause 1 Article 13 of the Circular No. 39?

Answer: Pursuant to regulations in Clause 5 Article 7, Clause 2 Article 13 and Clause 1 Article 16 of the Circular No. 39, credit institutions must establish criteria for certification of a customer’s financial status eligible for loans according to prescribed maximum interest rates to meet certain demands of borrowed funds, and they must provide such criteria to their customers in need of borrowed funds. If a customer fails to meet a credit institution’s criteria for certifying customer’s eligibility to obtain a loan with the maximum interest rate but satisfies all of other eligibility requirements for a loan prescribed in the Circular No. 39, he/she may also apply for a loan from that credit institution according to the agreed interest rate under regulations in Clause 1 Article 13 of the Circular No. 39.

4. Article 8: Rejected loan demands

Question 9: May credit institutions grant loans to customers for buying jewelry?

Answer: Clause 4 Article 8 of the Circular No. 39 stipulates that credit institutions shall not be allowed to approve loans used for buying gold bullions. Thus, credit institutions may consider approving loans used for buying jewelry to customers who satisfy eligibility requirements for loans as mentioned in the Circular No. 39.

Question 10: The Circular No. 39 does not include a provision on nullification of the Official Dispatch No. 6960/NHNN-TTGSNH dated September 16, 2016 on refusal to grant loans to new applicants to pay loan debts prior to the payment due date and extend credit under the form of rollover loan. Accordingly, are credit institutions allowed to approve loans used for repaying loan debts prior to the payment due date or rollover loans?

Answer: The Circular No. 39 takes effect as from March 15, 2017 and also provides regulations on cases where loans are granted for repaying loan debts owed to lending credit institutions, for repaying loan debts owed to other credit institutions and methods of extending rollover loans. Accordingly, as of March 15, 2017, credit institutions shall consider approving loans for repaying loan debts owed to credit institutions and rollover loans under regulations in the Circular No. 39.

Answer: Credit institutions shall, based on regulations in Clauses 1, 2 and 3 Article 8 of the Circular No. 39, determine whether demands of loans used for repaying debts owed to individuals or entities other than credit institutions are considered rejected loan demands. If loans demand are not subject to cases of rejected loan demands, credit institutions may consider granting loans to customers who meet eligibility requirements for loans as prescribed in the Circular No. 39 and other regulations of relevant laws.

Question 12: If a loan borrowed by a customer at another credit institution has several debt repayment periods, including a rescheduled repayment period, shall a credit institution be allowed to approve a loan used for repaying loan debts prior to the repayment due date in full?

Answer: If a loan has a repayment period rescheduled, it is considered as a loan under which debt rescheduling has been carried out. Therefore, pursuant to regulations in Clause 6 Article 8 of the Circular No. 39, a credit institution shall be not allowed to approve loans used for repaying debts of such loan prior to the repayment due date.

Question 13: In case a customer’s loan owed to a credit institution is due but his/her savings book is not due, can he/she mortgage his/her savings book for obtaining a loan from a credit institution for repaying due loan debts?

Answer: Pursuant to regulations in the Civil Code in 2015, mortgage of savings book for obtaining a loan is considered as a security for borrowed fund. Thus, pursuant to regulations in Clause 5 and Clause 6 Article 8 of the Circular No. 39, a credit institution shall be not allowed to approve a loan applied for by a customer who mortgages his/her savings book for obtaining such loan used for repaying loan debts due at such credit institution.

5. Article 13. Loan interest rate

Question 14: Pursuant to regulations in Clause 1 Article 13 of the Circular No. 39, a credit institution and its customer shall agree on the interest rate. Is this agreed interest rate governed by regulations in Article 468 of the Civil Code?

Answer: Pursuant to regulations in Clause 1 Article 468 of the Civil Code in 2015, the interest rate agreed on a loan shall not exceed 20% per year, unless otherwise prescribed by law; pursuant to regulations in Clauses 2, 3 Article 91 of the Law on Credit Institutions in 2010, a credit institution and its customer may carry out an agreement on the loan interest rate under effective regulations of law; in case where there is an unexpected development of bank operation, the State Bank has the right to stipulate the interest rates applied to business operation of credit institutions. Because the Law on Credit Institutions in 2010 and the Civil Code in 2015 contain different regulations on the loan interest rate, the loan interest rate shall be governed by regulations of the Law on Credit Institutions in 2010. Pursuant to Clause 3 Article 90, Clause 2 Article 91 of the Law on Credit Institutions in 2010, the Circular No. 39 has stipulated detailed regulation on the loan interest rate. Accordingly, the loan interest rate shall be agreed upon by the credit institution and its customer depending on capital demands and supplies on the market, loan demands and creditworthiness of customers, except for the cases where a customer applies for a loan to meet certain demands for borrowed funds and such customer meets all of eligibility requirements for a loan and is rated transparent and healthy in its financial status by the credit institution, and in such case, the loan interest rate shall be agreed upon by the credit institution and such customer provided that it must not exceed the maximum interest rate decided by the State Bank’s Governor over periods of time.

Question 15: Whether a credit institution shall be allowed to not specify the interest rate (%) in the loan agreement but specify that the loan interest rate shall be applied to each borrowed fund withdrawal and stated in the application for withdrawal of borrowed fund cum indebtedness contract or not?

Answer: Pursuant to regulations in Article 23 of the Circular No. 39, the loan agreement shall be established in the form of either a specific loan arrangement, or both framework and specific arrangement, and include at least 14 provisions, including a provision on the lending interest rate and the lending interest rate converted into percent (%)/year which is calculated on the basis of the actual amount outstanding and duration of maintenance thereof. Therefore, the agreement on the lending interest rate must be specified in the loan agreement (or the indebtedness contract) depending on the loan agreement form.

Question 16: With regard to a rescheduled loan, can a credit institution charge late payment interest on the outstanding balance of loan principal and interest during the extension period of such loan?

Answer: Pursuant to regulations in Point b Clause 4 Article 13 of the Circular No. 39, if a customer fails to make due payment of interest as agreed, that customer must pay late payment interest charged at the interest rate agreed upon between the credit institution and customer which is not allowed to exceed 10%/year interest rate on the outstanding balance of late payment interest in proportion to the period of late payment. Thus, if a customer fails to make due payment of interest, including interest of a rescheduled loan, the credit institution can charge the late payment interest on the outstanding balance of late payment interest at the interest rate agreed upon between the credit institution and customer which is not allowed to exceed 10%/year. Pursuant to regulations in Point c Clause 4 Article 13 of the Circular No. 39, a credit institution may charge interest on the outstanding amount of principal of which repayment is not made by the agreed due date and rescheduling is not accepted by the credit institution. Hence, if debt rescheduling is accepted, the credit institution may not charge interest on the outstanding principal amount during the extension period of such loan.

Question 17: Can you give detailed instructions on the lowest loan interest rate prescribed in Clause 5 Article 13?

Answer: The lowest loan interest rate prescribed in Clause 5 Article 13 of the Circular 39 is aimed to make the lending interest rate more transparent in cases where variable interest rates are applied. For this reason, if a credit institution and its customer carry out an agreement on variable interest rate over periods of time, e.g. the lending interest rate is equal to the interest rate for 12-month saving deposits plus a range of interest rates of 4%/year and at the time of determining the lending interest rate, if there are 03 different interest rates for 12-month saving deposits announced by the credit institution, the credit institution shall select the lowest interest rate for 12-month saving deposits to determine the lending interest rate for the adjustment period.

Question 18: Shall the recording of accounting entries and calculation of loan interest be carried out under regulations in the Circular No. 39 or regulations of the State Bank on interest calculation methods and recording of accounting entries of interests collected and paid by credit institutions (Decision No. 652/2001/QD-NHNN)?

Answer: The Circular No. 39 provides no regulation on accounting and calculation methods for loan interests. Thus, the recording of accounting entries of and calculation of loan interests shall be carried out in accordance with applicable regulations by the State Bank on interest calculation methods and recording of accounting entries of interests collected and paid by credit institutions (presently, Decision No. 652/2001/QD-NHNN).

Question 19: How is the lending interest rate recorded in cases where the interest rate is agreed upon by the credit institution and its customer without applying the method for calculating interest rate specified in Clause 3 Article 13 of the Circular No. 39?

Answer: If the credit institution and its customer carry out an agreement on the interest rate which is not converted into %/year (one year is calculated as 365 days) and/or do not apply the method for calculating the interest rate based on the actual outstanding amount of debt, the loan agreement which is made by the credit institution and customer must include terms and conditions of the interest rate converted into %/year (one year is calculated as 365 days) according to the actual outstanding amount of debt in accordance with regulations in Clause 3 Article 13 of the Circular No. 39.

E.g.: The lending interest rate agreed upon by the credit institution and customer for a loan with the loan term of 30 days is 7.5%/year (one year is calculated as 360 days). Pursuant to regulations in Clause 3 Article 13 of the Circular No. 39, the credit institution must convert such interest rate into %/year (one year is calculated as 365 days) and/or apply the method for calculating the interest rate based on the actual outstanding amount of debt and specify them in the loan agreement which is made with its customer. Accordingly, the loan agreement which is made by the credit institution must include both the agreed interest rate (7.5%/year) and the interest rate converted into %/year (one year is calculated as 365 days) which is calculated as follows: (7.5%/year : 360 days) x 365 days = 7.6042 %/year (one year is calculated as 365 days).

6. Article 14: Fees related to lending activities

Question 20: With regard to a loan which must be disbursed in several times during a long time period in which the customer commits to withdraw a specific amount of borrowed fund in each disbursement time, if that customer fails to withdraw borrowed fund as stated in his/her commitment in periods following the date of initial disbursement, shall the credit institution be allowed to collect fee paid for commitment to borrowed fund withdrawal over such periods?

Answer: Pursuant to regulations in Article 14 of the Circular No. 39, the credit institution shall only collect fee for a commitment to borrowed fund withdrawal in one time during the period from the date of entry into force of the loan agreement to the date of initial disbursement of borrowed fund.

7. Article 16. Provision of information

Question 21: Can the credit institution provide the customer with all necessary information before establishment of a loan agreement by posting this information at its transaction counters and/or publishing it on its official website?

Answer: The provision of information prescribed in Article 16 of the Circular No. 39 between a credit institution and its customer shall be made in any forms as agreed upon between the credit institution and customer based on the credit institution’s internal regulations.

8. Article 18: Repayment of loan principal and interest

Question 22: If a customer has an overdue interest amount, how will the priority order for collection of loan debts be applied? If the loan interest is overdue but the principal is not overdue but, at the date of repaying the principal due, the amount of money coming in the customer’s account is not enough for repaying both the principal due and the overdue interest amount, which priority order for debt collection can the credit institution apply?

Answer: If the loan principal is not yet overdue, collection of loan principal and interest shall be made as agreed upon by the credit institution and its customer in the loan agreement. If the loan principal is overdue, the credit institution shall observe the order in which collection of principal amount will take priority over that of interest amount.

9. Article 19: Debt rescheduling

Question 23: Is shortening of debt repayment period considered as debt rescheduling? Is change to amount payable in each debt repayment period (the number of repayment periods and the loan term are kept unchanged) considered as debt rescheduling? Is the extension of the agreed repayment date as requested by a customer because of change to source of funding for debt repayment (such as change to date of receiving salaries) considered as debt rescheduling?

Answer: Pursuant to regulations in Clause 10 Article 2 and Article 19 of the Circular No. 39, shortening of debt repayment period is not considered as debt rescheduling. Both change to the amount payable in each debt repayment period under which the amount payable in the first repayment period is lower than that in following repayment periods and extension of the agreed dates on which debt repayment is made in agreed repayment periods are considered as cases of debt rescheduling.

Question 24: With respect of a loan with several debt repayment periods, if the repayment of debt in the first period is overdue, shall the debt rescheduling be made in the second debt repayment period?

Answer: The credit institution is not allowed to approve the debt rescheduling for a loan of which the repayment is overdue in one or several repayment periods.

10. Article 20. Delinquent debts

Question 25: If the repayment of a loan principal is not yet overdue but the repayment of loan interest is not made on the agreed due date, is it become delinquent debt?

Answer: Article 20 of the Circular No. 39 stipulates that the credit institution shall perform delinquency procedures for the principal amount of which repayment is not made by the agreed due date and rescheduling is not accepted by the credit institution. This regulation on delinquent debt is aimed to determine the status of a debt (due or overdue repayment), the date of such debt becoming delinquent and the outstanding amount of debt becoming delinquent, and is used as the basis for calculating penalty interest; control of credit quality of borrowing customers is prescribed in the Circular No. 02/2013/TT-NHNN. Therefore, if a customer fails to make repayment of a loan interest on the agreed due date, the credit institution is not required to perform delinquency procedures for the principal amount. However, if a customer fails to make repayment of loan interest on the agreed due date, the credit institution shall be accorded the right to terminate the loan, collect debt prior to the payment due date under the loan agreement made by the credit institution and customer in accordance with regulations in Article 21 of the Circular No. 39.

Question 26: Delinquency is performed for the principal amount of which repayment is not made by the agreed due date. Is this regulation contrary to regulations on debt classification and provisions against risk in the Circular No. 02/2013/TT-NHNN?

Answer: Delinquency prescribed in the Circular No. 39 is aimed to determine the time of delinquency of debt and the outstanding amount of debt for calculating interest rate; classification of debts and establishment of provisions for credit risks of credit institutions are performed in accordance with regulations in the Circular No. 02/2013/TT-NHNN.

11. Article 23: Loan agreement

Question 27: A loan contract which is signed by and between the bank and customer includes the specific credit limit in USD and terms and conditions on disbursement which is made in VND or USD or other equivalent currency according to purpose of loan. The loan contract stipulates that the currency unit used for disbursing the borrowed fund shall be used for repaying debt, is this conformable to the Circular No. 39?

Answer: The loan agreement (specific loan arrangement or both framework and specific arrangement) should include specific terms and conditions on the currency unit used for extending the loan and that used for repaying debt in accordance with regulations in the Circular No. 39.

12. Article 24. Inspection of loan use

Question 28: If a customer mortgages his/her savings book when applying for a loan, is that customer required to provide written evidences?

Answer: Pursuant to regulations in the Civil Code in 2015, mortgage of savings book for obtaining a loan is considered as a security for borrowed fund. Pursuant to regulations in the Circular No. 39, all borrowing customers must meet all eligibility requirements for a loan and provide credit institutions with necessary documents evidencing their satisfaction of eligibility requirements for loan, including applications for loan with mortgage of savings book.

Question 29: Regulation in Clause 2 Article 24 may be interpreted that a credit institution is entitled but is not obliged to request its customer to provide documents evidencing the use of borrowed fund. Is this explanation true?

Answer: Pursuant to regulations in Clause 3 Article 94 of the Law on Credit Institutions, a credit institution is entitled and obliged to carry out inspection and supervision of use of borrowed fund and debt repayment made by its customer. Thus, the credit institution is obliged to carry out inspection and supervision of use of loan by the customer.

13. Article 25: Penalty and compensation in case of defaulting on a loan

Question 30: The loan agreement which is made by the credit institution and customer includes the customer's commitment to withdraw borrowed fund at a rate in proportion to the loan limit but at the date of disbursement, the customer withdraws an amount of borrowed fund lower than the agreed one, can the bank carry penalty for violation on that customer?

Answer: The penalty for violation shall be agreed upon by the credit institution and customer and specified in the loan agreement (the credit institution and its customer are not allowed to agree on penalty for violations against regulations on repayment of loan principal and interest).

14. Article 27: Lending methods

Question 31: With regard to line of credit loan, must the credit institution and its customer carry out procedures for lending and sign the loan agreement in each disbursement?

Answer: When adopting the method of line of credit loan, the credit institution shall conclude the line of credit contract (framework contract) and conclude a specific loan agreement (or certificate of indebtedness) when it extends a loan. Thus, the loan agreements in case of line of credit loan shall include a line of credit contract and specific loan agreements.

Question 32: What does the effective period of provisional line of credit loan which is not allowed to exceed 01 year mean?

Answer: The effective period of provisional line of credit loan which is not allowed to exceed 01 year means the effective period of a provisional line of credit loan shall not exceed 01 year as from the effective date of such provisional line of credit loan.

Question 33: With regard to the current account overdraft facility prescribed in Clause 6 Article 27 of the Circular No. 39, the customer is allowed to spend an amount of money within the overdraft limit to render payment services only. Is this true or false? What does payment service in this case mean?

Answer: Pursuant to regulations in Clause 6 Article 27 of the Circular No. 39, the current account overdraft facility means the customer is only allowed to spend an amount of money in the current account within the overdraft limit to render payment services on that current account under regulations in the Decree No. 101/2012/ND-CP dated November 22, 2012 and the Circular No. 46/2014/TT-NHNN dated December 31, 2014.

Question 34: The overdraft limit is maintained within the maximum period of 01 year, does it mean that the customer is allowed to use the overdraft limit within 01 year? May this period be extended every year? Is the current account overdraft facility subject to the regulation on lending procedures and supervision of use of borrowed funds?

Answer: Pursuant to regulations in Clause 6 Article 27 of the Circular No. 39, after ending the period of one year of maintenance of overdraft limit, the credit institution and its customer must conclude a new overdraft facility agreement; with regard to the current account overdraft facility, both the credit institution and its customer must strictly comply with regulations in the Circular No. 39, including regulations on lending procedures and supervision of use of borrowed funds.

Question 35: Pursuant to regulations on current account overdraft facility, shall the customer be allowed to withdraw an amount of money within the overdraft limit through a debit card as defined in the Circular No. 19?

Answer: Pursuant to regulations in Clause 2 Article 15 of the Circular No. 19/2016/TT-NHNN dated June 30, 2016, the overdraft facility on debit card shall be performed under effective regulations of the law and of the State Bank on lending activities. For this reason, the grant of an overdraft limit on a debit card shall be performed under regulations in the Circular No. 39. Thus, the customer shall not be allowed to withdraw an amount of money within the overdraft limit through a debit card.

Question 36: What are differences between the revolving loan and the rollover loan? How can the credit institution determine whether the customer incurs bad debts owed to other banks or not?

Answer: The revolving loan prescribed in Clause 6 Article 27 of the Circular No. 39 means a loan extended to a customer who has a short business cycle which is less than 01 (one) month. In order to enable a customer not to carry out procedures for the following loan at the credit institution, the credit institution shall consider extending a loan to the customer of which the loan term shall be longer than 01 (one) business cycle but not exceed 03 months; the credit institution should formulate internal rules for control of credit quality when adopting this lending method.

The rollover loan is usually granted to customers who have longer business cycle (usually, more than 06 (six) months). By adopting this method, the customer may apply for a short-term loan (e.g. 01 (one) month) because the customer may obtain a cash flow possible to repay debt to the credit institution; accordingly, the credit institution shall agree with its customer on a loan term of 01 month which shall be specified in the loan agreement and allow that customer to select whether to repay debt on the due date or to extend the loan term for a specific period of time provided that it must not exceed one business cycle of that customer. Total loan term under this lending method shall be calculated from the initial disbarment to the date on which the customer repays the loan principal and interest in full, and not exceed 1 year.

Question 37: In case of rollover loan, is the extension of debt repayment period considered as adjustment to a repayment period? If it is considered as adjustment to a repayment period, will the customer’s credit rating be downgraded?

Answer: Extension of a loan term in case of rollover loan is not considered as adjustment to a repayment period because the extension of the loan term has been agreed upon by the parties when concluding the loan agreement. During the loan term, the customer must meet requirements specified in the Circular No. 39 and the credit institution should establish specific procedures for controlling this matter.

Question 38: With regard to the rollover loan, what does total loan term which is not allowed to exceed one business cycle of the customer mean?

Answer: Pursuant to regulations in Clause 8 Article 27 of the Circular No. 39, total loan term of a rollover loan is not allowed to exceed 12 months from the initial disbursement date and one business cycle of the customer. Thus, total loan term (which is the sum of the agreed loan term and the extended period of the loan) is not allowed to exceed one business cycle of the customer.

15. Article 28: Loan term

Question 39: Shall a bank with short remaining duration of operation be allowed to approve loan of which the loan term exceeds the bank's remaining duration of operation?

Answer: If the validity of the license to operate of a credit institution remains for a short period, that credit institution is not allowed to extend loan of which the loan term exceeds the remaining effective period of the license.

16. Article 29 and Article 32: Storage of loan documentation

Question 40: Does the loan application dossier include the loan application form?

Answer: Pursuant to regulations in Article 9 of the Circular No. 39, a loan application dossier is a collection of documents evidencing a customer’s eligibility for such loan and others as referred to in the credit institution's instructions. The Circular No. 39 abrogates the regulation that a customer applying for a loan must submit a loan application form.

Question 41: Point c Clause 1 Article 32 stipulates that the credit institution that extends consumer loan must store loan documentation which includes the report on income generated by the customer during the loan term, is the credit institution required to prepare report on customer’s income in course of appraisal of the customer’s loan application? Is this report made according to the credit institution’s regulations or on a periodical basis?

Answer: Reports on income prepared in course of appraisal of a loan application are included in a loan application dossier because these reports are documents evidencing a customer’s eligibility for such loan. Thus, the credit institution must retain these reports. The credit institution shall consider and decide the preparation of periodic reports with the aims of controlling use of borrowed funds and solvency of its customer.

17. Article 34. Transition provision

Question 42: Pursuant to regulations in the Circular No. 39, customer performing a borrowing transaction with a credit institution rmust be a legal entity or an individual. In case a customer that is a private enterprise concludes a line of credit loan agreement with a credit institution before March 15, 2017, does such customer sign the certificate of indebtedness in the capacity of an individual or a private enterprise if the loan disbursement is made after March 15, 2017?

Answer: The transition provision in Article 34 of the Circular No. 39 includes regulations on credit contracts which are signed before the entry into force of the Circular No. 39; accordingly, the credit institution and its customer shall be allowed to comply with terms and conditions of the credit contract which is signed in accordance with laws and regulations in force at the date of signing of that credit contract, or agree on any revision of that credit contract as appropriate to regulations laid down in the Circular No. 39. If a signed line of credit loan agreement includes all of required contents as prescribed in Article 17 Lending rules of credit institutions of the Decision No. 1627/2001/QD-NHNN, the customer may sign the certificate of indebtedness in the capacity of a private enterprise and it’s not necessary to make revision of the signed line of credit loan agreement. If the signed line of credit loan agreement does not include all of required contents as prescribed in Article 17 Lending rules of credit institutions of the Decision No. 1627/2001/QD-NHNN, the certificate of indebtedness (specific agreement) must include sufficient information to ensure that the line of credit loan agreement and the certificate of indebtedness (specific agreement) include all contents prescribed in Clause 1 Article 23 of the Circular No. 39, and the customer is required to sign that certificate of indebtedness in the capacity of an individual.

Question 43: Pursuant to Clause 2 Article 34, if the duration of maintenance of a credit which is 01 year is agreed upon in terms and conditions of a credit contract which also includes a provision on automatic extension thereof, must the credit institution suspend the maintenance of such credit at the time of automatic extension?

Answer: If the duration of maintenance of a credit which is 01 year is agreed upon in terms and conditions of a credit contract which also includes a provision on automatic extension thereof, the extension (or revision) must comply with regulations in the Circular No. 39.

Question 44: If a credit contract is signed before the entry into force of the Circular No. 39 and under which the loan disbursement has been made but the debt repayment is not due, shall the application of rollover loan or revolving loan to such disbursed amounts be allowed?

Answer: If a credit contract is signed before the entry into force of the Circular No. 39, the credit institution and its customer shall continue carrying out contents of the signed credit contract; in case of application of rollover loan or revolving loan method, the credit institution must carry out revision of that credit contract in conformity with regulations in the Circular No. 39./.