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Report on short term foreign loans in Vietnam

Foreign loans are known as the borrower receives a credit from a non-resident through the signing and execution of foreign loans. In addition to the forms of foreign loans guaranteed by the government, some forms of self-borrowing and self-responsibility become more popular, especially short term foreign loans. To manage the borrowing and use of loans, the law has regulations about the borrower’s responsibility to report. Viet An Law Firm will analyze the report on short term foreign loans in Vietnam as follows.

Report on short term foreign loans in Vietnam

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    Legal basis

    • Circular 08/2023/TT-NHNN of the State Bank regulating conditions for foreign loans not guaranteed by the government.
    • Circular 12/2022/TT-NHNN of the State Bank guiding foreign exchange management for foreign loans and repayment of enterprises, amended and supplemented by Circular 21/2023/TT-NHNN.

    What is a short term foreign loan?

    Definition

    A short-term foreign loan is a foreign loan that is not guaranteed by the government with a loan term of up to 01 year. Thus, unlike the mid-term, long-term foreign loans, short term foreign loans have a loan term of less than 01 year.

    A short term foreign loan is also known as self-borrowing and self-paying a short-term foreign loan.

    Purpose

    For borrowers who are in a credit institution, foreign bank branches, foreign short term borrowers serve some purposes as follows:

    • Supplementing capital sources serving credit granting activities according to the borrower’s credit growth.
    • Restructuring the borrower’s foreign debt.

    For the borrower who is a credit institution, foreign bank branch, or foreign short-term borrower to serve some purpose as follows:

    • The borrower only uses short term foreign loans to restructure the borrower’s foreign debts and pay short term debts which have to be paid in cash (not combined with the principle of domestic loans).
    • In addition, the borrower who must ensure financial safety criteria following specialized law may use short term foreign loans to serve their professional activities with capital terms not exceeding 12 months from the time of capital withdrawal of foreign loans.

    Limit and ensure safety rate

    Having a short term foreign loan, the borrower must ensure the regulations of law on ensuring safety ratios in Credit Institutions Law at the end of the last 03 months before the day of signing the foreign loan agreement, change the increase foreign loan agreement. Besides, the borrower needs to pay attention to the limit of short term foreign loans following Article 15 of Circular 08/2023/TT-NHNN. Specifically, the borrower only borrows short term foreign loans in case they meet the limit of short term foreign loans at 31/12 of the year preceding the time the loan arises. The limit of a short term foreign loan is the maximum rate of total the principal balance of a short term foreign loan calculated on the individual own capital, applicable to the following subjects:

    • 30% for commercial banks;
    • 150% for foreign bank branches, and other credit institutions.

    Regulation of report on short term foreign loans in Vietnam

    According to Chapter VI of Circular 12/2022/TT-NHNN, the regulation of  reports on short term foreign loans include:

    Reporting regulation for banks providing account service

    Banks providing account services carry out the reporting regulation as prescribed by the State Bank on the statistical reporting regulations applied to the units of the State Bank and credit institutions and foreign bank branches.

    Reporting regulation for the borrower

    Every month, no later than the 5th of the following month of the reporting period, the borrower must report online the implementation of long-term, medium, and short-term foreign loans on the website. In case the website has a technical error so that it is unable to be submitted, the borrower shall submit a written report.

    • Within 10 working days from the day receiving the borrower’s report on the website, the State Bank branches approve the report on the website (or enter information from the writing report in case the website has a technical error) to save information to the database. In case the information is correct, the borrower will be notified by email about completing the reporting according to regulations. In case the information is not correct or needs to be confirmed, the State Bank branches notify by email to the borrower to adjust the database.
    • Within 03 working days after detecting the error in the foreign loan and repayment report, the borrower has the responsibility to report online on the website (or report by writing in case the website has a technical error) the status of long-term, mid-term and short term loan implementation situation with the fixed database; meanwhile; notify the State Bank branches by email to censor.

    Ad-hoc report

    In unexpected cases or when necessary, the borrower and bank providing account services shall make reports upon the request of the State Bank.

    New points in regulations of report on short term foreign loans

    Compared to Circular 03/2016/TT-NHNN, some new points in regulations of the report on short-term foreign loans in Circular 12/2022/TT-NHNN are as follows:

    Compulsory use of State Bank’s website

    Unlike Circular 03/2016/TT-NHNN, according to Circular 12/2022/TT-NHNN, the borrower must register an account on State Bank’s website and send a report on their foreign loans to State Bank through this website.

    Website address: www.sbv.gov.vn or http://www.qlnh-sbv.cic.org.vn/.

    Monthly report

    The borrower must report the status of short-term loans to the State Bank on State Bank’s website monthly, instead of quarterly as per regulations in Circular 03/2016/TT-NHNN.

    Remarkable notes for enterprises related to the report on short term foreign loans in Vietnam

    Subjects of the report

    Residents are enterprises, cooperatives, unions of cooperatives, credit institutions, and foreign bank branches established and operating business activities in Vietnam make detailed reports on the implementation of short term foreign loans not guaranteed by the Government outstanding debt on the reporting period.

    • The time limit of the report: No later than the 5th of the following month next to the report month.
    • Form of report: Report in writing to the State Bank branches in provinces and centrally run cities where the borrower’s head office is located.
    • State authority: State Bank branches in provinces where the borrower’s head office is located.
    • Report form: The form of the report on short-term foreign loans is guided in Appendix 05 attached to Circular 12/2022/TT-NHNN.

    Guide to make a report

    Covered loans are short-term loans (with a term of up to 01 year). The loan term starts from the expected date of loan proceed withdrawal (receipt of money or customs clearance of goods) to the expected date of final repayment as the loan agreement. Short-term foreign loans that are overdue but the borrower has arranged to repay the loan within 10 days from one year of the loan (thus not having to register the loan with the State Bank), will be reported as a short-term loan.

    The borrower sends a report to fill in the type code of the borrower according to the categories as follows:

    No Type of business entity of the borrower Code
    Category of enterprises (not combine commercial banks, foreign bank branches)
    1 State-owned enterprises as defined in the Law on Enterprises 2015 SOE
    2 Enterprises with 50% to less than 100% of charter capital owned by the State S50
    3 Enterprises with 51% to less than 100% of charter capital owned by foreign investors F51
    4 Enterprises with 10% to 51% of charter capital owned by foreign investors F10
    5 Other enterprises KHA
    Category of banks
    6 Joint venture banks, banks with 100% of foreign capital, foreign bank branches FOB
    7 Other joint-stock commercial banks BAK

    Legal services on foreign loans in Vietnam by Viet An Law Firm

    • Legal advice on short-term loan conditions; documents, procedures and reports on foreign loans;
    • Prepare documents and report on foreign loan documents;
    • Representing clients, conducting procedures at competent state agencies;
    • Consulting on legal issues during and after short term foreign loans.

    Clients who have related questions or need legal support regarding reporting short term foreign loans or registering foreign loans, please contact Viet An Law Firm for the best support!

    Disclaimer: This article was last updated in February 2024. Laws may have changed since then. Please contact Viet An Law to confirm the information in this article is current and for any legal assistance.

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