Directive No. 04/CT-NHNN of September 17, 2013, on the classification of rescheduled loans and handling of non-performing loans

 THE STATE BANK OF VIETNAM

Directive No. 04/CT-NHNN of September 17, 2013, on the classification of rescheduled loans and handling of non-performing loans

The State Bank Governor promulgated Decision No. 780/QD-NHNN of April 23, 2012, on the classification of rescheduled loans, Circular No. 02/2013/TT-NHNN of January 21, 2013, on the classification of credit assets, levels and methods of setting risk provisions for handling risks in the operations of credit institutions and foreign bank branches (below referred to as Circular No. 02), and Circular No. 12/2013/TT-NHNN of May 27, 2013, amending Circular No. 02. In order to precisely reflect the credit quality of rescheduled loans to suit the production and business conditions of enterprises and effectively implement Circular No. 02 when it takes effect, the State Bank Governor requests credit institutions, foreign bank branches and units of the State Bank of Vietnam to perform the following tasks:

1. Credit institutions and foreign bank branches shall:

a/ Reschedule loans and retain loan groups on the basis of assessing the production and business conditions, service provision, and loan repayment capacity of customers; strictly examine and control rescheduled loans and retain loan groups so as to ensure that customers will be able to repay their rescheduled loans; not reschedule loans and retain loan groups for customers who use loans not for purposes indicated in credit contracts, breach other terms in credit contracts or violate other relevant regulations;

b/ Proactively make their own decisions on loan rescheduling on the basis of monitoring and assessing the production and business situation and financial capacity of customers while considering the adjustment of lending rates to suit the financial capacity of customers, credit institutions and foreign bank branches themselves as well as the practical situation of the monetary market to help customers overcome difficulties in production and business activities;

c/ Reschedule loans and retain loan groups only when customers are unable to repay loan principals and/or interests within the lending duration or unable to fully repay loan principals and/or intere sts within the lending duration agreed in the credit contracts, have feasible and appropriate production and business plans, and are appraised by credit institutions or foreign bank branches to have better capacity to repay the rescheduled loans;

d/ Issue internal regulations on rescheduling of loans and retention of loan groups for uniform implementation in the whole banking system; apply an internal control mechanism for loan rescheduling to assure strict control and safety, prevent and stop the abuse of loan rescheduling and the retention of loan groups to incorrectly reflect the credit quality. Report the above internal regulations and control mechanism to the State Bank of Vietnam (the Banking Supervisory Agency) before November 1, 2013;

dd/ Elaborate and report implementation plans to the State Bank of Vietnam (the Banking Supervisory Agency and provincial-level State Bank branches in the localities where credit institutions or foreign bank branches are based) before November 1, 2013, and commit to fully implement the provisions of Circular No. 02 when it takes effect. Before the 25^th of the last month every quarter, report the results of implementation of the above plans to the State Bank of Vietnam (the Banking Supervisory Agency and provincial-level State Bank branches in the localities where credit institutions or foreign bank branches are based).