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The Governor of the State Bank of Viet Nam (SBV) issued Circular No 29/2013/TT-NHNN on lending in foreign currency by credit institutions and foreign bank branches to resident borrowers on 6 December 2013. The Circular applies to (1) credit institutions and foreign bank branches permitted to conduct foreign exchange activities and lend in foreign currency to clients; and (2) residents borrowing from credit institutions and foreign bank branches.

Lending in foreign currency by credit institutions and foreign bank branches

Credit institutions and foreign bank branches (the "lending bank") may evaluate and decide to lend in foreign currency for the following demands:

(1) Short-term, medium-term and long-term loans to make offshore payments for the import of goods and services when the borrower has sufficient foreign currency from production or business revenue to repay the loan.

(2) Short-term loans to primary oil and petrol import enterprises obtaining the Ministry of Industry and Trade's 2014 oil and petrol import quota and not having sufficient foreign currency from production or business revenue to repay the loan. This provision applies until 31 December 2014.

(3) Short-term loans to meet domestic capital demands to implement production or business projects for export of goods via Vietnamese border gates and when the borrower will have sufficient foreign currency from export revenues to repay the loan. When the lending bank disburses loan monies, the borrower must sell by way of a spot transaction this amount to the lending banks, except where the borrower needs to make payment in foreign currency under the regulations. This provision applies until 31 December 2014.

(4) Loans for offshore direct investment in projects or works of national importance, having the investment policy approved by the National Assembly, Government or Prime Minister and granted an offshore investment certificate by the Ministry of Planning and Investment.

The lending banks may evaluate and decide to lend in foreign currency outside the above list in the priority fields or the fields in which development of production or business is encouraged by the Government after SBV approves each specific case.

SBV approval to lend in foreign currency

To lend in foreign currency to clients, the lending bank must send a written request, including the following contents to SBV for approval:

(1) The lending bank has evaluated the client's production or business project and is assured that the project is feasible and efficient. The client must satisfy borrowing conditions under the regulations on lending. The lending bank is able to recover the loan, including principal and interest, on time. The lending bank's request must include a specific report on the client's current financial status, production or business status, source for loan repayment, and demands to borrow in foreign currency, to implement its production or business project in the priority field or the field in which development of production or business is encouraged by the Government;

(2) The lending bank must include a specific report on its own foreign currency sources in order to provide the loan, and an undertaking to ensure balancing of its foreign currency sources as appropriate for the term and amount of the loan; and that the loan complies with current regulations on lending, foreign exchange control, limits on extension of credit, prudent ratios applicable to the lending bank and other relevant regulations;

(3) The lending bank undertakes to be responsible for the results of evaluation and decision to lend in foreign currency to clients and information contained in the request.

SBV will approve the lending bank's foreign currency loan within a maximum 30 business days after receipt of the lending bank's request.

Lending banks' responsibilities

The lending banks providing loans in foreign currency must comply with this Circular, regulations on lending, foreign exchange control, prudent ratios and other relevant provisions. The lending banks must provide monthly reports to SBV on their foreign currency loans on the 12th day of the following month.

This Circular takes effect on 1 January 2014 and replaces SBV Circular No. 37/2012/TT-NHNN (28 December 2012). — MAI COUNSEL