The State Bank of Vietnam clarifies lending regulations

On November 8, 2023, the State Bank of Vietnam (SBV) issued Circular No. 8631 to clarify certain issues regarding lending regulations under SBV Circular No. 6/2023 dated June 28, 2023 (Circular 6/2023), which amends SBV Circular No. 39/2016. SBV dated December 30, 2016, on the lending activities of credit institutions (CIs) and/or foreign bank branches with customers (Circular 39/2016).

The table below highlights some notable responses from the SBV.

The regulations on digital lending (excluding Article 32b) apply to both individuals and legal entities. Regarding Article 32b on customer identification and verification of customer identification information, it does not apply to corporate customers but only applies to individuals using loan funds for living expenses, not for other purposes such as business activities or other activities.

Question	Answerfromthe State Bank of Vietnam	Our Opinion
1. Questions 1 and 2 regarding loans for living expenses	1.1. For loans intended for living expenses: customers are only required to provide information on planning/projects if the purpose of the loan is (i) purchasing a residential property, (ii) constructing/renovating a residential property, or (iii) purchasing land for the purpose of building a residential property. The content of such planning and project information shall be implemented in accordance with the internal regulations of the credit institution.	1.2. Credit institutions need to review their internal regulations and supplement the information regarding the plans/projects that customers must provide to obtain a loan for such purposes.
2. Question 4: May a financial institution provide a loan to a customer to repay foreign debt?	2.1. Yes, provided that the foreign loan meets the requirements under Article 8.6(a) and 8.6(b) of Circular 39/2016,[1] and the borrower meets the borrowing conditions under Circular 39/2016.
3.Question 6: What forms of deposits are financial institutions prohibited from lending out for deposit-related purposes? Do these forms include deposit certificates issued by financial institutions?	3.1. Pursuant to Article 4.13 of the 2010 Law on Credit Institutions, accepting deposits includes demand deposits, time deposits, savings deposits, the issuance of deposit certificates, promissory notes, bank promissory notes, and other forms of deposit acceptance based on the principle of full repayment of principal and interest to depositors as agreed. Accordingly, a credit institution may not provide loans for the purpose of purchasing deposit certificates issued by that credit institution or another credit institution.	3.2. Please refer to our opinion in Question 8 below.
4. Question 8: Is a credit institution permitted to grant loans for margin deposits under Article 8.7 of Circular 39/2016?	4.1. Yes, provided that the customer meets the loan eligibility criteria and the loan complies with the credit institution’s internal regulations on lending and loan management.	4.2. It is unclear whether a security deposit can be considered a deposit. According to Article 330 of the 2015 Civil Code, a security deposit is an amount of money, precious metals, gemstones, or other negotiable instruments deposited by the obligor into a security deposit account at a credit institution to secure the performance of an obligation. 4.3. It could be argued that a security deposit may be considered a deposit. If so, the SBV’s response to Question 8 here may contradict the response to Question 6 regarding the prohibition on lending for deposit purposes.
5. Question 9: Is interest on overdue principal that has not been paid considered interest arising from the overdue principal or unpaid interest within the repayment period? What is the procedure for collecting interest on the aforementioned overdue principal?	5.1. According to Article 18.4 of Circular 39/2016, unpaid overdue principal interest (interest on overdue principal) is interest arising from the overdue principal. The procedure for collecting interest must be agreed upon between the credit institution and the customer.
6. Question 10: Must a financial institution prioritize collecting the overdue debt with the longest overdue period if the customer has more than one overdue debt?	6.1. No, because Circular 39/2016 does not specify the order of collecting overdue debts in cases where the customer has more than one overdue debt. This will depend on the agreement between the financial institution and the customer.
7. Question 14: Is a credit institution required to ask the customer to provide documentation proving the use of the overdraft loan?	7.1.According to Article 94.3 of the 2010 Law on Credit Institutions, a credit institution has the obligation to inspect and monitor the customer’s use of borrowed funds. This obligation also applies to overdraft loans.	7.2. Since the State Bank of Vietnam (SBV) has not clearly confirmed whether credit institutions are required to ask customers to provide documentation proving the use of overdraft loans, this may lead to differing interpretations (namely, (i) credit institutions must collect documentation to inspect and monitor the use of overdraft loans). overdraft loan usage or (ii) CIs do not need to collect such documents as long as they can verify and monitor the use of the overdraft loan). 7.3. If the first interpretation is adopted, CIs may face challenges because collecting documents for overdraft loans could be impractical and not straightforward.
8. Question 15: Does the provision stating that CIs must review and re-determine the maximum credit limit and the duration of that limit at least once a year imply that the maximum credit limit is granted for a period of 12 months?	8.1. No. Article 27.4 of Circular 39/2016 does not limit the loan term for credit line facilities.
9. Question 16: Do the provisions on digital lending set forth in Section 3 of Circular 39/2016 apply to cases where one or more stages of the lending process are conducted via digital means, or do they apply only to cases where all stages of the lending process are conducted via digital means?	9.1. Cases where one or more stages of the lending process are conducted via digital means must also comply with the digital lending regulations set forth in Section 3 of Circular 39/2016.
10. Question 18: Do the digital lending regulations apply to both individuals and legal entities, or only to individuals?	10.1.The digital lending regulations (except Article 32b) apply to both individuals and legal entities. Regarding Article 32b on customer identification and verification of customer identification information, it does not apply to corporate customers but only applies to individuals using loan funds for living expenses, not for other purposes such as business activities or other activities.
11. Question 19: Are credit institutions permitted to provide digital loans for loans used for purposes other than living expenses?	11.1. Credit institutions shall review and decide whether to provide digital loans for loans serving living expenses, business purposes, and other activities in accordance with Section 3 of Circular 39/2016.	11.2. The SBV’s response is unclear because it is unclear whether the provisions in Section 3 of Circular 39/2016 are intended to apply only to loans for living expenses or whether they may also apply to loans for other purposes.
12. Question 29: Is a credit institution responsible for the results of the appraisal, the loan approval decision, and the assignment of tasks to individuals and departments involved in these processes if these processes are conducted on a third-party platform or system?	12.1. Yes, because according to Articles 3, 17, 32d of Circular 39/2016 (as amended), the credit institution is responsible for the results of the appraisal, loan approval decisions, and the assignment of tasks to each individual and relevant department (even if these stages are implemented on a third-party platform/system)
13. Question 30: Is it reasonable that, pursuant to Article 32e of Circular 39/2016 (as amended), an electronic loan agreement must comply with the legal provisions on electronic transactions and must include the mandatory contents specified in Article 23 of Circular 39/2016?	13.1. Correct. The law on electronic transactions stipulates that electronic contracts and loan agreements must contain the minimum contents specified in Article 23.
14. Question 31: According to Article 32e of Circular 39/2016, must a loan agreement be signed exclusively by the legal representative of a credit institution, or can any authorized person sign the loan agreement using traditional methods?	14.1. Circular 39/2016 does not specify the authority to sign loan agreements; therefore, credit institutions must rely on current regulations to establish procedures for signing (whether through traditional or digital methods) in their internal regulations.
15. Question 35: Who has the authority to sign the loan approval decision under Article 32g of Circular 39/2016?	15.1. The authorized signatory is the person with the authority to: 15.1.1. approve the criteria/conditions for loans, the information system supporting loan application review, and the loan decision-making process; or 15.1.2. approve the loan in accordance with the CFI’s internal regulations.
16. Question 37: Guidance on cases where a credit institution cannot retain an individual customer’s records because the customer (as the data subject) requests the deletion of their personal information pursuant to the right stipulated in Article 16 of Decree 13/2023.	16.1. Decree 13/2023 excludes cases governed by specialized laws. Therefore, credit institutions shall retain loan records in accordance with Article 96 of the Law on Credit Institutions.
17. Question 43: Is the issuance of a promissory note required to comply with Circular 39/2016 (as amended) if the credit institution and the customer signed a framework agreement before September 1, 2023, but the loan disbursement was made after September 1, 2023?	17.1. If the framework agreement signed before September 1, 2023, does not fully include the minimum contents specified in Article 23 of Circular 39/2016, then the acknowledgment of debt for the loan disbursement made after September 1, 2023, under that framework agreement must comply with Circular 39/2016.

View Circular 6/2023 of the State Bank of Vietnam dated June 28, 2023 here