1
VIETNAM BANKFOR SOCIAL POLICIESNo: 55/Q§-HDQT / Socialist republic of vietnamIndependence- Freedom - Happiness
Hanoi, February 24, 2006
decision
OF THE ACTING CHAIRMAN OF THE BOARD OF DIRECTORS
VIETNAM BANK FOR SOCIAL POLICIES
On issuance of the Regulation on handling non-performing loans managed by Vietnam Bank for Social Policies
ACTING CHAIRMAN OF THE BOARD OF DIRECTORS
OF VIETNAM BANK FOR SOCIAL POLICIES
- Pursuant to the Charter on organization and operation of Vietnam Bank for Social Policies issued in accordance with the Decision 16/2003/QD-TTg dated on January 22nd 2003 by the Prime Minister;
- Pursuant to the Decision No. 69/2005/QD-TTg dated on April 4th 2005 by the Prime Minister on issuance of the Regulation on handing non-forming loans managed by Vietnam Bank for Social Policies;
- Pursuant to the Circular No. 65/2005/TT-BTC dated on August 16th 2005 by Minister of Finance guiding implementation of the Regulation on handling non-forming loans managed by Vietnam Bank for Social Policies issued in accordance with the Decision No. 69/2005/QD-TTg dated on April 4th 2005 by the Prime Minister;
HEREBY Decides:
Article 1. Issuing in accordance with this Decision the “Regulation on handling non-forming loans managed by Vietnam Bank for Social Policies”.
Article 2. This Decision will come into effect from the signing date and shall replace existing documents regulating the handling of non-forming loans borrowed by poor households and other policy beneficiaries.
Article 3. As for the clients who have met with risks due to objective reasons before the effective date of the Cicular No. 65/2005/TT-BTC (20/9/2005), the clients and Vietnam Bank for Social Policies will be responsible for preparing documents to submit for handling and undertaking bad debt handling in accordance with previously-issued guiding documents.
Article 4. General Director, Managers of Departments at VBSP Head Office, Directors of VBSP provincial branches and managers of VBSP district transaction offices are responsible for implementation of this Decision.
Cc:- Members of VBSP BOD;
- Board of Management;
- Central Agencies implementing this program;
- Functioning departments at the Head Office;
- Provincial VBSP branches;
- VBSP Transaction Center;
- Archieved at the VBSP General Secretariat and Credit Department. / ON BEHALF OF THE BOARD OF DIRECTORS of vietnam bank for social policies
Ha Dan Huan
REGULATION
HANDLING NON-PERFORMING LOANS MANAGED
BY VIETNAM BANK FOR SOCIAL POLICIES
(Issuance in accordance with the Decision No. 55/QD-HDQT
dated on February 24th 2006 by the Chairman of the Board of Directors
of Vietnam Bank for Social Policies)
Article 1. Objectives of handling non-performing loans (NPLs) due to objective reasons of Vietnam Bank for Social Policies
1. To create conditions for clients borrowing from VBSP to overcome difficulties, recover production and bussinesses to generate incomes to pay back to the bank.
2. To create conditions to handle NPLs due to objective reasons and to strengthen financial capacity of Vietnam Bank for Social Policies.
Article 2. Applicable subjects
Clients borrowing from the VBSP in accordance with the Article 2 of the Decision No. 78/2002/ND-CP dated on October 4th 2002 by the Government on credits for the poor and other policy benificiaries meeting risks due to objective reasons leading to partial and complete loss of capital and assets, which force them into finacial difficulties will be considered for NPL handling under this Regulation, including:
1. Poor households.
2. Disadvantaged students studying at universities, colleges, or vocational training schools.
3. People in need of funds for job creation according to Resolution No. 120/HDBT dated April 11th 1992 of the Council of Ministers (presently being replaced by the Decree No. 39/2003/ND-CP dated on April 18th 2003 of the Government defining in details and guiding implementation of some articles of the Code of Labor on employment).
4. Social policy beneficiaries serving as migrant workers abroad for limited terms.
5. Economic organizations, productive households located on islands; in mountainous areas II, III and those under Socio-Economic Development Program for specially vulnerable communes in mountainous, remote and isolated areas (if any).
6. People borrow to buy house with deferred payment or to build houses in the flooding areas in Mekong River Delta under the Decision No. 105/2002/QD-TTg dated on August 2nd 2002 and the Central Highlands under the Decision No. 154/QD-TTg dated on November 11th 2002.
7. Those borrow under the clean water and rural environment sanitation under the Decision No. 62/2004/QD-TTg dated on April 16th 2004 by the Prime Minister.
8. Others mandated by the Prime Minister.
Article 3. Director of Transaction Center and those of provincial-level branches will be responsible to the Chairman of the Board of Directors and the General Director of the VBSP for preparing documents to submit fro handling NPLs for clients of his/her unit.
Article 4. Scope of NPL handling
1. This Regulation guides the handling of NPLs due to objective reasons for clients borrowing from the VBSP in accordance with the above Article 2.
As for clients borrowing from the VBSP with gareenty assets and meeting risks due objective reasons, branhes are entitled to actively handle the asset under agreement with clients and in accordance with the law regulations to collect capital. The amount collected from these actions will be used to cover expendictures for handling gareenty assets; repay the principal and interests to the bank; the remain will be paid to the client and if this amount is not enough to cover those costs, the deficit will be treated in accordance with the regulations of this document.
2. NPLs to the poor and other policy benificiaries borrowing from the VBSP due to subjective reasons made by organizations and/or individuals, are subjective to compensation by those organizations and/or individuals in accordance with the law.
3. As for those lendings to the poor and other policy benificiaries from the VBSP by the capital sources of assistance and entrust funds under each Agreement or Contract signed with domestic and international organizations and/or individuals, in which the risk handling contingency has been extracted or agreement on capital source for handling NPLs have been made, handling of those NPLs will be implemented in accodance with the Agreement and /or Contract signed with organizations and/or individuals.
Article 5. Rules for handling NPLs
1. Examination and handling of NPLs will only be implemented under the following conditions:
a. Clients are poor households and policy benificiaries, who has received loans under regulations of the Article 2 and have used the capital for the right purpose;
b. Clients get losses due to objective reasons which lead to partial or complete loss of capital or assets;
c. Clients are facing with financial difficulties which make them unable to pay back to the Bank.
2. Handling of NPLs will be considered according to each case based upon the reasons, risk scope and the ability to pay back of the clients and have to ensure the integrity of legal documents and process as well as objectivity and equality between the borrowers.
Article 6. Objective reasons which lead to direct losses of capital and assets of the clients include:
1. Clients will be considered for exemption or reduction of borrowing interest rate when meeting with the following objective reasons which lead to direct losses of capital and assets:
a. Natural disasters: storm, flooding, drought, crop losses, earthquake, thunderbolt, hail, landslide, whirlwind and tide wave.
b. Epidemics and war.
c. Fire and forest fire.
d. Epedemics in relation with human being, aminal, likestock, aquatic species and plant.
®. Policy changes made by the State which directly affect production and bussiness activites of the borrowers such as: extinction of material sources; the products are banned for transaction or regulated by the law or the borrowers have to change their production and bussiness activites under decisions by State authorities.
e. Political, socio-economic changes in the world or in the country where Vietnamese laborers are working which directly affect the migrant workers such as: bankrupcy of the enterprise, where the workers are working for; unemployement due to unilateral ending of the working contract by the employer or those meet with professional acidence during his/her working abroad.
2. Write-off will be applied when clients meet with the following objective reasons leading to direct losses of capital and asset:
a. The borrowers loss civil behaviors or catch diseases which have to be treated for long term or are in special difficulty situation without any supporter, die or disappear or have been anounced to die or disaappear and with no asset to pay back or not having any inheritor or the inheritor is unable to pay back for the borrower.
b. The borrowers are legal entities and/or economic organizations which have been decided to dissolve or bankcrupt according to the law and have not any capital and/or asset to pay back for the Bank.
Article 7. Regulations on risks on a large and small/single scale.
1. Risks caused by objective reasons as specified in Item 1, Article 6 which happen to clients borrowing from VBSP in at least 5 communes and wards will be considered as risks happening on a large scale (not regarding admistrative territory such as district and province).
2. Risks caused by objective reasons as specified in Item 1, Article 6 which happen to clients borrowing from VBSP, which are not regulated in Item 1, Article 7 will be considered as risks happening on a small/single scale.
Article 8. Time and mandate to handle NPLs.
1. Prime Minister shall consider and decide the handling of NPLs caused by objective causes for large scale risks specified in Item 1 Article 7 and for small/single scale specified in Item 2 Article 6. Handling of NPLs caused by objective reasons will be implemented in turns based upon proposal by People’s Committee of Provinces and Centrally-run cities and appraisal of inter-ministerial team.
2. Chairman of the Board of Directors will consider and decide the handling of NPLs caused by objective reasons on a small/single scale once a year.
Article 9. NPLs handling approaches
1. Exemption of loan interests:
a. Conditions for exemption of loan interests:
- Clients get into risks due to objective reasons and/or meet with financial difficulties missing ability to pay back to the VBSP but still be able to pay back in the furture.
- Loss scope on captital and assets of clients is specified as follow:
+ As for poor households, clients under lending for job creation, housing loans and clean water and rural environment sanitation programs: loss scope on capital and assets caused by reasons specified in Paragraph d, Item 1, Article 6 from more than 80% in comparison with the total capital to implement the project trë lªn so víi tæng sè vèn thùc hiÖn dù ¸n hoÆc ph¬ng ¸n s¶n xuÊt, kinh doanh cña kh¸ch hµng.
+ As for disadvantaged students: loss scope on capital and assets of his/her family during the unemployment period of the student caused by objective reasons as specified in Item 1 Article 6 from at least 80% in comparison with the borrowings of that students.
+ As for migrant workers: loss scope on the worker incomes due to causes specified in Paragraph e, Item 1, Article 6 from at least 80% in comparison with the total incomes defined in the working contract.
b. Exemption amount for each client is specified as follow:
- Clients with interest debts at the VBSP on the date of submission for handling lower or equal to the total interest amount payable to the Bank caculated for the in-due period (excluding the extension period) will be exempted from all the interest amount payable to the VBSP.
- Clients with interest debts at the VBSP on the date of submission for handling bigger than the total interest amount payable to the Bank caculated for the in-due period (excluding the extension period) will only be exempted from the interest amount equivalent to the interest amount caculated for the in-due period.
2. Reduction of loan interests:
a. Conditions for loan interest reduction:
- Clients get into risks due to objective reasons and/or meet with financial difficulties missing ability to pay back to the VBSP but still be able to pay back in the furture.
- Loss scope on captital and assets of clients is specified as follow:
+ As for poor households, clients under lending for job creation, housing loans and clean water and rural environment sanitation programs: loss scope on capital and assets caused by reasons specified in Paragraph d, Item 1, Article 6 from 40% to below 80% in comparison with the total capital to implement the project trë lªn so víi tæng sè vèn thùc hiÖn dù ¸n hoÆc ph¬ng ¸n s¶n xuÊt, kinh doanh cña kh¸ch hµng.
+ As for disadvantaged students: loss scope on capital and assets of his/her family during the unemployment period of the student caused by objective reasons as specified in Item 1 Article 6 from from 40% to below 80% in comparison with the borrowings of that students.
+ As for migrant workers: loss scope on the worker incomes due to causes specified in Paragraph e, Item 1, Article 6 from 40% to below 80% in comparison with the total incomes defined in the working contract.
b. Reduction amount for each client is specified as follow:
- Clients with interest debts at the VBSP on the date of submission for handling lower or equal to 50% of the total interest amount caculated for the in-due period (excluding the extension period) will be reduced from all the interest amount payable to the VBSP.
- Clients with interest debts at the VBSP on the date of submission for handling bigger than 50% of the total interest amount caculated for the in-due period (excluding the extension period) will only be reduced from 50% of the total interest amount caculated for the in-due period.
3. Write-off (principal and interests)
- Write-off will be applied for clients who meet with risks due to reasons specified in Item 2, Article 6 of this Regulation.
- VBSP branches will be responsible for applying solutions to best collect both principal and interests before submission to provincial-level people’s committes and the VBSP Head Office for consideration and submission for write-off.
- The write-off amount is equal to the amount payable to the Bank by the borrowers (both principal and interests) after applying collection sollutions.
Article 10. Legal documents required to consider and handle NPLs
1. As for the interest exemption and reduction, the legal documents consist of:
a. Request for loan handling by the borrower (From No. 01/NRR)
b. Document certifies the loss scope on capital and assets made by the VBSP office where the clients borrow and the client him/herself with certicication of th authorities, specifically:
- As for poor households: Document certifies the loss scope on capital and assets (From No. 02A/NRR) with certification of:
+ Head of Savings and Credit Group;
+ Commune-level socio-political organizations, which undertake entrust lending to poor households;
+ Commune-level People’s Committe (CPP), where the borrower is living;
+ Certification by commune-level specialized agencies (if any): flooding and storm control, fire and animal health agencies.
In the case where specialized agencies do not exist, the CPP will certify and clearly write that specialized agencies do not exist in the communal administration.
- As for lending for job creation: Document certifies the loss scope on capital and assets (From No. 02B/NRR) with certification of:
+ CPC where the client is living or implementing the project;
+ Labor, War Invalids and Social Affair Affiliates or mass organizations of which the client is a member of implementing project.
- As for lending to disadvantaged students: Document certifies the loss scope on capital and assets (From No. 02C/NRR) with certification of CBC on the fact that his/her family met with risks during the umemployement period of the student.
- As for lending to migrant workers: Document certifies the loss scope on capital and assets (From No. 02D/NRR) with certification of:
+ CBC where the client is living;
+ Organizations which have undertaken procedures for labor export (Recruitment) if the organization still in operation;
+ Authorities certifying that the worker is working aboard under a time-limited contract;
+ Documents relevant to the migrant workers meeting with risks due to objective reasons specified in Item 1, Article 6 of this Regulation (if any).
- As for lending under housing loans and clean water and rural environement sanitation as well as other programs subject to approval by the Prime Minister: Document certifies the loss scope on capital and assets (From No. 02DĐ/NRR) with certification of:
+ Head of Savings and Credit Group (if any);
+ Commune-level socio-political organizations, which undertake entrust lending to poor households (if any);
+ Commune-level People’s Committe (CPP), where the borrower is living;
c. Copies of credit contracts or savings and credit passbooks with balances (capital and interests) to the date of submission for handling (si9nged by the Director of the VBSP which undertook lending activities).
d. As for lending to economic organizations (coooperatives, SOEs, limited companies, joint stock companies, foreign invested enterprises and other eligible economic oganizations as specified in the Article 84 of the Civil Code No. 33/2005/QH11 dated on May 5th to June 14th 2005 by the National Assembly), the following documents will be required in addition to the above-mentioned documents:
- Document certify the loss level on capital and assets in accordance with the law (if any);
- Fiancial reports of the latest 2 years by the economic organizations;
- Production and bussiness recovery approach of the economic organization.
- Relevant documents clarifying the capital and asset losses.
2. As for write-off, legal documents consist of:
a. Request for NPL handling prepared by the borrower (Form No. 01/NRR), in which the cause of capital and asset losses, loss level, paying-back ability, loan amount payable to the Bank as well as the requested write-off (pricipal and interests) must be claried by the borrower or the representative according to the law.
In the case, which the borrowers die, disappear or loss civil behaviors without any inheritor according to the law: if lending is undertaken through SCG (project), the SCG (project investor) have to write a request for NPL handling; if lending is not undertaken through SCG, the request is not required.