The State Bank of Vietnam (the “SBV”) issued Circular No. 42/2018/TT-NHNN dated 28 December 2018 (“Circular 42”) that amends and supplements specific articles of Circular No. 24/2015/TT-NHNN of the SBV dated 8 December 2015 (“Circular 24”) regulating lending in foreign currencies to resident borrowers by credit institutions and foreign bank branches established and operating in Vietnam (the “Lenders”). Circular 42 took effect from 1 January 2019.
1. The conditions and deadlines for lending in foreign currencies for offshore payments of imported goods and services
|Circular 24||Circular 42|
|The Lenders may provide short-term, mid-term and long-term loans in foreign currencies for the purpose of offshore payment for the import of goods and services if the borrowers have sufficient foreign currencies from production and business income to repay such loans.||(i) Lenders may provide foreign currency loans for the purpose of offshore payment for the import of goods and services in the following cases:
(i) Short-term loans: until 31 March 2019; and
(ii) Mid-term and long-term loans: until 30 September 2019.
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(ii) Lenders may provide short-term loans to meet domestic capital needs to implement plans to produce and/or trade goods exported through Vietnam’s border checkpoints. When loans are disbursed, borrowers must sell such amounts of foreign currency to the Lenders in spot foreign exchange transactions, except for cases where loans are used to make payment in foreign currencies as stipulated by the laws.
The borrowers must have sufficient foreign currency revenue from exports to repay the loans.
2. Repayment currencies
A borrower may buy foreign currencies from other credit institutions and foreign bank branches to repay the loan to the Lender if:
(i) due to objective reasons, the borrower does not have enough volume of foreign currency when repayment is due; or
(ii) prior to execution of the credit or loan agreement, the Lender assesses that the borrower does not have sufficient income in foreign currencies. In this case, the credit institutions and foreign bank branches selling foreign currencies to the borrower must transfer such foreign currencies to the Lender.
3. Transitional period
Loan agreements executed before 1 January 2019 will not be subject to Circular 42, the Lender and the borrower can continue to follow the agreed terms and conditions in accordance with the provisions of law at the time of signing. Amendments and supplements to credit agreements must comply with provisions of Circular 42 however.
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This article is written by DFDL Lawyers.
This article was first published on the DFDL website.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.