The impact of the Covid-19 pandemic is increasingly serious, affecting the production and business activities of the entire country, thereby impacting the credit activities of the system of credit institutions and branches of foreign banks.
Therefore, the Government has requested the State Bank of Vietnam to direct credit institutions to implement a number of solutions, such as reducing lending rates, to support businesses and people affected by the Covid-19 pandemic in order to stabilize production.
1. Support for debt restructuring and interest rate reduction during the Covid-19 pandemic.
On February 14, 2020, during the regular Government meeting for January 2020, the Government issued Resolution No. 11/NQ-CP with the key content: “The State Bank of Vietnam directs credit institutions to restructure loan repayment terms; waive or reduce interest rates, maintain loan classifications, and provide new loans to stabilize production and business, and support businesses and people in overcoming difficulties caused by the epidemic.”
Accordingly, on February 24, 2020, the State Bank of Vietnam issued Document No. 1117/NHNN-TD, which requested credit institutions to proactively assess the business situation, review and evaluate the extent of damage and impact on customers borrowing capital due to the Covid-19 pandemic in order to restructure loan repayment terms; waive or reduce interest rates; and temporarily maintain the loan classification for customers with loans affected by the Covid-19 pandemic and with outstanding principal and/or interest due between January 23 and March 31, 2020, until the State Bank of Vietnam issues a detailed guiding circular.
2. Conditions apply
Restructuring loan repayment terms, waiving or reducing interest, and maintaining the same loan classification for customers must meet the following two requirements:
1. Customers proactively request an extension of the repayment period, waiver or reduction of interest, and maintenance of the same debt classification, and the credit institution assesses the extent of damage, impact, financial capacity, and ability to repay the debt after the repayment period is restructured.
2. Credit institutions have issued guidelines for the unified implementation of this content throughout the system, including specific regulations on: Criteria for identifying debts affected by the Covid-19 pandemic; and the content of inspection, control, and supervision of debts whose repayment terms have been restructured, interest waived or reduced, and whose debt classification remains unchanged, to ensure consistent implementation throughout the system.
At the same time, credit institutions must proactively create conditions for new loans to customers in accordance with regulations to support customers affected by the COVID-19 pandemic in stabilizing their production and business.
The State Bank of Vietnam requires credit institutions to proactively, independently decide, and take responsibility for support activities as guided in this document, ensuring strictness, safety, and targeting the correct beneficiaries; and preventing and deterring the misuse of the mechanism to misrepresent credit quality.
Simultaneously, credit institutions must report the results of debt restructuring, interest waivers and reductions, temporary maintenance of debt classifications, and new lending as prescribed for customers affected by the COVID-19 pandemic to the State Bank of Vietnam (through the Banking Inspection and Supervision Agency and the Department of Credit for Economic Sectors) by March 15th and March 31st.
