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State Bank of Vietnam Socialist Republic of Vietnam
No. 07/TT Independence-freedom-Happiness
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Hanoi, March 26th 1994.
I. General regulation
1. State Bank is the State Management organ responsible for borrowing and paying foreign debt of businesses, that belong to all kinds of economical composition established and operated according to current law of Vietnam, including borrowing foreign capit al of business, which had been established and operated according to the Law of foreign Investment in Vietnam.
2. Businesses are allowed to borrow from foreigners or borrow from sources of government or State Bank by the way of self-borrowing, self-paying.
- Directly borrow: business directly borrows and pays the foreign debt.
- Borrow from Government source or State Bank: business borrows from domestic banks, the capital which Government or State Bank had borrowed from foreigners.
3. The State Bank manages the borrowing and paying foreign debt through annual and five-year plan of borrowing and paying foreign debts, which had been allowed by Prime Minister of Government.
4. State Bank sets up the limit level of borrowing and paying foreign debts in following basis.
- Needs in capital and ability of debt-payment of State Budget concerned with borrowing and paying the trading debt.
- Needs in borrowing capital and ability in paying foreign debt of businesses.
- Situation of international balance of payment.
- Monetary policy of the State in each period.
The establishing plans of borrowing and paying the foreign debt of business must be implemented according to regulations of Governor of State Bank.
5. Borrowing and paying foreign debt of businesses must be implemented through banks, which are allowed to do the external operation (commercial banks, Banks for Development and Investment, which have been allowed to do the external operation), have right to borrow and to pay foreign debts. If the businesses want to borrow the capital that the government or the State Bank had borrowed from foreigners, they have to do it through Commercial Bank, Bank for Development and Investment designated by State Bank and Ministry of finance (in short Lending Bank).
6. The borrowings from foreigner is including:
- The borrowing from foreigner of government (consist of the borrowing by furniture or money).
- The borrowing from foreigner of business (including credit organizations by furniture or money by the way of self-borrowing, self-paying).
- State Bank borrows from foreigners.
II. Borrowing and paying the foreign debt of business from the capital that Government or State Bank had borrowed from foreigner.
7. Businesses are allowed to borrow the capital of government which had borrowed from foreigner to implement the project (included projects of infrastructure) agreed by Vietnamese government and foreign partner.
But condition to borrow this money will be consented by Ministry of finance, State Bank and loan bank.
In the case, when borrowing from foreigners is free of interest. The Ministry of finance and State Bank consent the concrete rate of interest.
8. for the capital source, which State Bank had borrowed from foreigner, the State Bank will choose the loan bank. Basing on articles and conditions, which had been signed with foreigners the State Bank will discuss with the loan bank the conditions for b usiness, who wants to borrow. On principle, condition of lending such as: time, rate of interest, fees are not more favourable than the condition for State Bank to borrow from foreigner, and not higher than domestic borrowing conditions.
9. Condition for business to borrow (included capital that government and State Bank had borrowed from foreigners).
9.1. to investment projects construction, new construction, extension, renovation of the technology, manufacturing trading, service area.
9.2. The project, that have possibilities to refund and have the capital sources to pay the debt (included capital and profit) in time.
9.3. financial situation of business must be stable without tax debt to budget, without bad debt to domestic and overseas units.
9.4. Business have to use capital for the aims that have been favored and under the regulation the loan bank.
The loan bank concretely regulates and guide the loan which mentioned in this article.
10. The borrowing and paying must be using the same foreign currency. In the case, when the borrowing and implemented by afferent foreign currencies or in Vietnamese Dong, it must be agreed in the credit contract such as: Rate of exchange and other concer ned condition.
11. The loan bank have right to take the final decision to lend on basis of conditions for business to borrow according to article 9 of this circular. Within 30 days, since the day, when the loan bank receives the file of business, it has to answer the bu siness. After examination if business haven't got enough condition according to Article 9 of this circular. The loan bank must report to governor of State Bank. Minister of Ministry of finance (if the capital is from the source which government had borrow ed) and also report to head manager of business in order to consider and solve coordinately. for the capital, which had been directly borrowed from the State Bank, the loan bank which reports to the Governor of State Bank to consider.
12. Regarding to the schedule of the borrowing agreement among Vietnamese and foreigners, the loan bank consents with the business to fix the concrete date for paying the debt considering the time for domestic and overseas money transference to ensure deb t-payment in time to foreigners.
13. The loan bank have responsibility to recover the capital to pay the debt for the budget and the State Bank sufficiently and in time.
13.1. In the process of the borrowed capital if business have any difficulty in paying the debt, the loan bank will be together with the business to find the solution. In essential case, the business and the loan bank must report to the State Bank, the Mi nistry of finance and superior State administration office of business to co-ordinate to solve the problem.
13.2. If the business can not pay the debt according to regulation of the borrowing contract, the loan bank must use it's capital to pay this debt for the budget and the State Bank. The solution for the borrowing sums from Government will be implemented o n the basis of the guidance of the Ministry of financial. In the case, when these sum have been used for the projects assigned by the Government imposing the high rate of interest (approximately with the market and having the weak possibility of refund).
14. By 10th of every month masters of project must report situation of taking the capital out and paying the debt of the month before, according to the guidance of the Loan bank, where masters of project has borrowed the capital from.
15. Every quarter, every year, the loan bank must report to the Loan Bank in higher rank, at the same time to the Director of Branch of the State Bank in the locations, where the business is operating in order to manage.
16. Every quarter, every year, General Director of Commercial Banks, Banks for Development and Investment have responsibilities to report to the Governor of State Bank the result of implementation and the turnover of the borrowing and paying of each busin ess by the form No.1 of the appendix. The time for sending the report had been regulated as following.
- Quarter's report: must be within 10 days of the first month of the following quarter.
- Year's report: must be within 15 days of January of the following year.
III. Business directly borrows from foreigners.
17. The borrowing from overseas by the ways of self-borrowing self-payment of State-run business to invest in the capital construction must be under the following condition.
17.1. The borrowing sums belong to the total limit level of borrowing capital from foreigner which had been permitted by the Government.
17.2. The economic-technique argument or economic-technique report, estimation had been checked by the Jurisdiction ranks the order of setting-up and examination of economic-technique argument must follow regulation of the rules of the capital constructio n management.
17.3. Document of agreement of the State Bank and Ministry of finance about condition of borrowing and paying foreign debts.
17.4. The document of agreement of the guaranty bank (if lending partner have a requirement).
18. Producing activity, overseas borrowing by the way self-borrowing, self-paying, State-run businesses must have following condition.
18.1. The borrowing sum belong to the total limit level of borrowing capital from foreigner, which had been permitted by the government.
18.2. The project of business-production had been agreed by the superior management office of business. The examination of those project will be implemented according to the guidance of superior management office of business.
18.3. The business have no debt of budget, no default in debt payment for domestic and overseas unit. The borrowing capital from foreigner is to implement the functions and duties of the business.
18.4. Project of trading-producing must self proportion, the foreign currency to pay the debt.
18.5. Accept on principle the guaranty of a bank if lending partner requires.
19. State run business will be allowed to borrow capital from foreigner for investment project of capital construction (based on Article 17 of this circular) after the files of borrowing request has been agreed in a written text about borrowing and paying condition by State Bank and Ministry of finance.
for borrowing sum for trading-producing activities mentioned in article 18 of this Circular the file of borrowing request must be agreed in a correspondence by the State Bank.
20. The file of the request of borrowing from foreigners of State run business for capital construction investment and trading-producing activities consist of:
- form to the bank to request the borrowing capital from foreigner.
- Project of trading-producing activities and project of paying the debt which have been agreed by the office that manages the business. Accept, on principle the guaranty of a bank if lending partner requires.
The final document of agreement with the foreign lending partner on condition such as: rate of interest, all the kind of fees, date of payment and expansion, guaranty condition and other conditions related to capital borrowing contact, which will be signe d.
When the State run business borrow capital for the capital construction investment projects, their economic-technique argument must be consented by liable offices.
- The license of investment must be given by liable offices (for the companies with foreign investment)
- Credit organization, which are allowed to do external operation, have right to borrow directly capital from foreigner in the scale of borrowing, paying foreign debt limit, which had been agreed by the governor of the State Bank.
22. The guarantee for the business, who borrows capital from foreigner, must be apply basing on regulation of guaranteeing and re-guaranteeing the borrowing capital from foreigner which have been issued by Governor of State Bank.
23. Private business have the right to borrow directly capital from foreigner by the way of self-borrowing, self-paying obeying the condition of total limit of borrowing, paying for the foreign debts, which had been agreed.
Borrowing sum for the capital construction investment projects, the condition must be agreed by State Bank.
24. Within 30 days, since the date of signature of capital borrowing contract, the business have to provide the copies of these documents to the State Bank, Ministry of finance and guaranty Bank.
25. The businesses are allowed to transfer the debt payment to overseas just in case when the transferring debt-payment is conforming with regulations of the management of foreign exchange and borrowing sum that have been confirmed by the Bank when busine ss is doing procedures to borrow the foreign capital.
All the capital drawing and paying for debts must be implemented through bank, which had been allowed to do external operation.
26. The head manager of the business have duty to answer Prime Minister of Government, the governor of State Bank, and the Ministry of finance.
- Economic efficiency of Trading-producing project of business, guiding, giving facilities for business to implement the project in order to ensure to pay off the foreign debt (included capital and profit) in time.
Reporting the business implementation of borrowing and paying debt quarterly and annually following the form appendix No.2 of this circular. The time to send the report have been regulated as following.
- The report of the quarter within the first 10 days of the first month of the following quarter.
- The report of year: within the first 15 days of January of the following year.
The report must be sent to the Central State Bank and the Ministry of finance.
IV. Borrowing and paying foreign debt of enterprises with foreign investment.
27. Subject that have been considered to borrow capital from foreigners are enterprises which have the foreign investment (included contract of trading cooperation and established basing on the foreign Investment Law in Vietnam).
28. The Enterprises with foreign investment capital are allowed to borrow foreign debts as other Vietnamese businesses by 2 ways.
28.1. To borrow from capital sources, which the State Bank have borrowed from foreigner through trading Banks, Vietnamese Banks for Investment-Development.
28.2. Directly borrow from foreigner (self-borrowing, self-paying).
29. The enterprises with foreign investment are allowed to borrow directly from foreigner following the regulations in article of Chapter 3rd of this circular with the following conditions.
29.1. In the case when the borrowing sums are of the aim to increase investment capital or capital for implementation of the contract, it must be agreed by the office, which is guarantying the investment license.
29.2. Paying the foreign debt (included capital and project) the enterprise must ensure not to reduce legal capital of it's own and must implement the payment by the order of priority regulated in decree No.18/CP dated 16/4/1993 of government on concrete regulations of the implementing the foreign investment law in Vietnam.
29.3. In the case, when the foreign partner requires to transfer the borrowing sum to their account opened in a foreign Bank, the transference must be agreed by the Governor of State Bank.
30. In special cases, the Government will designate for the borrowing sums of enterprises that the guarantee have foreign investments.
V. Examination, inspection and settlement.
The Branches of the State Bank and the loan bank will check, inspect the situation of the borrowing-paying foreign debt of businesses that had been agreed to borrow from foreigner by them. The result of the examination, inspection, settlement and resoluti on must be sent to the Central State Bank at once. In the case, when business using the borrowing capital for other aims to the re-borrowing project, the loan bank will stop the taking capital out and report to the State Bank, Ministry of finance and the Head Management office of business to find the solution.
32. All of transgression of this circular will be disciplined according to current law.
VI. Article for implementation.
33. This circular becomes effectual since the date of signature. The before regulations, which is opposite with this circular will be abolished.
34. Chief of bureaus, departments, Chiefs of offices, Chief inspectors of The Central State Bank, Director of the State Banks of provinces cities, General director of Commercial Banks, Banks for Development and Investment in the scale of their function ha ve duty to guide, implement this circular.
35. Ministries, Government Branches office, People Committee of provinces, cities, depending on their duties, functions combines to guide the implementation of this circular.
for The State Bank of Vietnam Deputy Governor
LE VAN CHAU