Circular No. 03/2012/TT-NHNN: foreign currency lending by domestic credit institutions and foreign bank branches for resident borrowers

Updated 16:24, Thursday, 24/05/2012 (GMT+7)

The State Bank of Vietnam (SBV) issued Circular No. 03/2012/TT-NHNN on March 8 on foreign currency lending by domestic credit institutions and foreign bank branches for resident borrowers

This Circular effects on May 2, 2012 and replace Circular No. 07/2011/QD-NHNN of the SBV Governor dated March 24, 2011 on foreign currency lending by credit institutions for resident borrowers.

Accordingly, domestic credit institutions and foreign bank branches with foreign exchange service license should decide to extend short, medium and long-term foreign currency loans for overseas payment of goods and service importation to those resident borrowers who are able to make repayment by their foreign exchange revenue from production - business.

For loan demands other than those above-mentioned, credit institutions and foreign bank branches may decide to provide resident borrowers with foreign currency loans of various terms for such purposes as:

1) short term loans for overseas payment of petrol importation should be approved in writing by the SBV Governor; and

2) loans should be approved SBV Governor in writing for each specific case at the request of credit institutions on the basis of:

a) the foreign currency loan demand for implementing the projects and production - business plans in the prioritized areas as set by the Government

b) evaluated by credit institutions and foreign bank branches as feasible projects and plans and the borrowers' ability to meet the lending requirements in line with applicable laws on lending.

Circular No. 03/2012/TT-NHNN has new point in comparison with Circular No. 07/2011/TT-NHNN. According to Circular No. 07/2011/TT-NHNN, credit institutions and foreign bank branches may provide short term loans to borrowers provided that these borrowers must have foreign currency return from export to pay the debts and where the borrowers use loans for using domestically, they have to sell borrowed foreign currency amount to lending institutions according to spot foreign exchange rates. But, according to Circular 03/2012/TT-NHNN, from date of May 2nd 2012, these target clients shall not be provided with such foreign currency loans. Thus, to reduce demand for foreign exchange and the pressure on the exchange rate, SBV's policy aims to limit clients of foreign currency loans.

(Source: Bizconsult)

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