LEGAL UPDATE: Did you know that to support companies affected by Covid-19, on 13 March, the State Bank of Vietnam (SBV) issued a circular allowing banks (including foreign bank branches) in Vietnam to restructure the repayment periods, waive and/or reduce interest payments and fees for bank loans without having to re-classify these loans as bad debts?
The circular is valid as of 13 March.
I. Extension of repayment period
Borrowers can apply for an extension for repaying principal and interests under this Decree if the loans meet the following conditions:
1. The obligation to repay principal and/or interests arise between 23 January 2020 to the date falling one day after 3 months from the date the Prime Minister announces the end of the Covid-19 pandemic;
2. Borrowers are unable to repay because of decrease in revenue due to the impact of Covid-19;
3. The outstanding loan amount is not yet overdue or has become overdue 10 days from the repayment date as set out in the relevant loan agreement.
4. The outstanding amount has become overdue in the period from 23 January 2020 to the date falling one day after the 15th day the circular becomes valid (28th March);
5. The loans are not in violation of any law.
In respect of loans that meet the above conditions, banks can extend the debt repayment period for up to 12 months from the last repayment date when the loans have to be repaid in full.
II. Waiver/reduction of interests and fees
Banks may also waive or reduce interests and fees for eligible loans where repayment obligations for interests and fees arise between 23 January 2020 to the date falling one day after 3 months from the date the Prime Minister announces the end of the Covid-19 pandemic. Note this does not apply to the purchase and investments in corporate bonds.
III. Other SBV policy changes to lessen the impact of Covid-19
Note also that on 17 March, the SBV cut its refinance rate from 6% to 5% and the discount rate from 4% to 3.5%.
The overnight lending rate in the inter-bank market is reduced to 6% from 7%.
The SBV also lowered the caps on the interest rates of dong-denominated deposits.
It also asked banks to lower the maximum dong lending interest rate for short-term loans to 5.5% from 6%.
Banks are further requested to sterilize bank notes to prevent Covid-19 spread.
Circular 01/2020/TT-NHNN of the State Bank of Vietnam dated 13 March 2020 (valid as of the same date).
DNLegal, 18 March 2020
