Circular 08/2023/TT-NHNN stipulating conditions for foreign loans not guaranteed by the Government

On June 30, 2023, the Governor of the State Bank issued Circular 08/2023/TT-NHNN stipulating conditions for foreign loans not guaranteed by the Government.

Full text of Circular 08/2023/TT-NHNN stipulating conditions for foreign loans not guaranteed by the Government

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Basic information of Circular 08/2023/TT-NHNN

Basic information about Circular 08/2023/TT-NHNN issued by the Governor of the State Bank Regulations on conditions for foreign loans not guaranteed by the Government include:

Contents of regulations on conditions for foreign loans not guaranteed by the Government according to Circular 08/2023/TT-NHNN

Subjects of application of regulations on conditions for foreign loans not guaranteed by the Government

Circular 08/2023/TT-NHNN clearly states that the subjects of application of regulations on conditions for foreign loans not guaranteed by the Government include:

• Residents being enterprises, cooperatives, unions of cooperatives, credit institutions and foreign bank branches established and doing business in Vietnam are foreign borrowers.
• Credit institutions, foreign bank branches in Vietnam where the borrower opens accounts for foreign borrowing and debt repayment.

At the same time, the application of conditions for foreign loans not guaranteed by the Government in accordance with relevant legal provisions as follows:

• Borrowers borrowing foreign loans in the form of international bond issuance, in addition to meeting the conditions for foreign loans not guaranteed by the Government, must comply with the provisions of law on the offering of corporate bonds to the international market and other relevant laws and regulations.
• The borrower being a state-owned enterprise, in addition to meeting the conditions for a foreign loan that is not guaranteed by the Government, must comply with the law on management and use of state capital to invest in production and business and other relevant laws.

New regulations on loan limit

For the case where the borrower is a credit institution and foreign bank branch, Article 15 of Circular 08/2023/TT-NHNN stipulates the limit on foreign short-term borrowing as follows:

• Credit institutions and foreign bank branches in order to be able to borrow short-term foreign loans must meet the limit on short-term foreign loans as of December 31 of the year preceding the time of borrowing.
• For borrowers being commercial banks: 30% of the total principal balance of short-term foreign loans. For the borrower being a branch of a foreign bank or other credit institution: 150% of the total principal balance of short-term foreign loans.

For the case where the borrower is not a credit institution and foreign bank branch, Article 18 of Circular 08/2023/TT-NHNN stipulates the foreign loan limit as follows:

Firstly, in case of borrowing from abroad to implement an investment project, two conditions must be satisfied, including:

• Condition 1 is the principal balance of the borrower’s medium- and long-term domestic and foreign loans (including short-term loans extended and short-term overdue to medium and long-term) serving for an investment project shall not exceed the loan limit of the investment project.
• Condition 2 is that the loan limit of an investment project specified at Point a, Clause 1, Article 18 is the difference between the total investment capital of the investment project and the investor’s contributed capital recorded in the Investment Certificate. investment, investment registration certificate, written approval of investment policy.

Secondly, in case of foreign loans to implement production, business and other projects of the borrower, the balance of medium and long-term domestic and foreign loans of the borrower (including short-term loans are extended, and short- term loans are overdue to medium and long-term) for this purpose, not exceeding the total loan demand in the plan on using foreign loans approved by competent authorities in accordance with regulations provisions of the law.

Thirdly, the case of a foreign loan to restructure the borrower’s foreign debt. Accordingly, the maximum amount of foreign loans for the purpose of restructuring foreign debts must not exceed the total value of the principal balance, the amount of interest, unpaid fees of the existing foreign debt and the fees of new loans are determined at the time of structure.

In case the new foreign loan is a medium or long-term loan, within 05 working days from the date of withdrawal of the new loan, the borrower must repay the existing foreign loan so that after 05 working days working days mentioned above, the borrower guarantees the loan limit.

Short-term foreign loans are not subject to regulations on foreign borrowing limits in the following cases: foreign loans to implement investment projects; foreign loans to carry out production, business and other projects of the borrower.

Foreign loans in the form of goods import deferred payment

Circular 08/2023/TT-NHNN stipulates that foreign borrowers in the form of importing goods with deferred payment are not required to comply with the conditions for foreign loans specified in this Circular.

Foreign borrowers in the form of importing goods with deferred payment are responsible for complying with regulations on foreign exchange management for enterprises’ foreign borrowing and repayment, and the provisions of the law on commerce, foreign trade management and other relevant laws.

Principles of using foreign loans

Borrowers must take full responsibility for using foreign loans for the right purposes.

In case the loan has been withdrawn but temporarily not used for lawful foreign borrowing purposes, the borrower can use this money to deposit money at credit institutions, foreign bank branches operating in Vietnam. The maximum term of each deposit is not more than 01 month.

Foreign loan currency

According to Circular 08/2023/TT-NHNN stipulating, foreign borrowing currency is foreign currency. Foreign loans in Vietnam dong can only be made in the following cases:

• The borrower is a microfinance institution;
• The borrower is a foreign direct investment enterprise borrowing from profits from direct investment activities in the Vietnamese territory of the lender being a foreign investor contributing capital at the borrower;
• The borrower withdraws capital and repays the loan in foreign currency and the debt obligation of the loan is determined in Vietnam dong.

The borrower and related parties are solely responsible for complying with the provisions of the current law on secured transactions and other relevant provisions of law when signing and performing security transactions for foreign loans.

Borrowers and related parties are solely responsible for complying with the provisions of applicable laws relating to foreign loan interest rates and other costs related to foreign loans when agreeing on foreign loans costs.

In order to monitor the limit of self-borrowing and self-paying foreign loans, when necessary, the Governor of the State Bank of Vietnam shall decide on the application of conditions on foreign borrowing costs; decide and announce the ceiling on foreign borrowing costs in each period.

Foreign loans of state enterprises must be approved by the competent authority, appraised and approved in accordance with the law on assignment and decentralization of the exercise of rights, responsibilities and obligations of the state-owner, represent the owner for state enterprises and comply with the law on management and use of state capital invested in production and business in enterprises.

Some questions related to foreign loan registration procedures

What is a foreign loan that is not guaranteed by the government?

Foreign loan that is not guaranteed by the Government (hereinafter referred to as “self-borrowing, self-paying”) means the borrower makes a foreign loan by the method of self-borrowing, self-responsibility for debt repayment.

What principles must be met when using foreign loans?

Pursuant to Article 6 of Circular 08/2023/TT-NHNN, when using foreign loans, it is necessary to ensure the following principles:

• The borrower is fully responsible for the use of loan capital in accordance with the law;
• The borrower may use the withdrawn capital but not yet used for other purposes to deposit it at credit institutions, foreign bank branches operating in Vietnam with a maximum deposit term of no more than 01 month.

Is it true that the borrowing party for foreign loans in the form of deferred payment for imported goods will not be required to comply with the conditions of foreign loans that are not guaranteed by the Government?

Borrowers who borrow foreign loans in the form of import of goods with deferred payment are not required to comply with the conditions for foreign loans not guaranteed by the Government based on Article 5 of Circular 08/2023/TT-NHNN on foreign loan in the form of import of goods with deferred payment: “The borrower taking a foreign loan in the form of importing goods with deferred payment is not required to comply with the foreign loan conditions specified in this Circular.”

Clients need advice on foreign loan conditions not guaranteed by the Government or foreign loan registration procedures, please contact Viet An Law Firm for the best support!