Restructuring the debt term, exempting, reducing interest and fees, maintaining the classified debt type to assist customers affected by the Covid-19 epidemic

LEGAL UPDATES

Restructuring the debt term, exempting, reducing interest and fees, maintaining the classified debt type to assist customers affected by the Covid-19 epidemic

On September 7th, 2021, the State Bank of Vietnam issued Circular No. 14/2021/TT-NHNN (“Circular 14/2021/TT-NHNN”), which came into effect on the same issuance day, to amend and supplement some provisions of Circular No. 01/2020/TT-NHNN dated March 13th, 2020 on credit institutions and foreign bank branches rescheduling the debt term, exempting, reducing interest and fees, maintaining classified debt types to assist customers affected by the Covid-19 pandemic, with the following new points:

Firstly, credit institutions, foreign bank branches reschedule debt terms for the principal and/or interest balance of the debt that meets all of the following conditions:

  • Arising before August 1st, 2021, from lending and financial leasing activities instead of arising from June 10th, 2020 as before.
  • The obligation to repay principal and/or interest arises during the period from January 23th, 2020 to June 30th, 2022 instead of only arising until December 31st, 2021.
  • The outstanding balance of the debt may be rescheduled for repayment in one of the following cases:
    • The outstanding balance of the debt is undue or has been overdue for not more than 10 days from the payment due date or the debt term according to the contract or agreement (except the cases b, c, d mentioned below).
    • The outstanding balance of the debt arises before January 23th, 2020 and becomes overdue from January 23th, 2020 to March 29th, 2020.
    • The outstanding balance of the debt arises from January 23th, 2020 to June 10th, 2020 and becomes overdue before May 17th, 2021.
    • Supplementing the outstanding balance of the debt arising from June 10th, 2020 to before August 1st, 2021 and becoming overdue from July 17th, 2021 to September 7th, 2021.
  • The customer is assessed by the credit institution, foreign bank branches as incapable of paying the principal and/or interest on schedule under the agreement due to a decrease in revenue, income caused by Covid-19 pandemic.
  • The customer applies for rescheduling of the repayment debt term and is assessed by the credit institution or foreign bank branches to fully pay the principal and/or interest after the debt is rescheduled.
  • The credit institution, foreign bank branches shall not reschedule the debt term that violates regulations of law.
  • The rescheduling period (including debt deferral) shall be appropriate for the impacts of the Covid-19 pandemic on the customer. It shall not exceed 12 months from the day on which rescheduling is granted by the credit institution, foreign bank branches, or from the original deadline for payment of the outstanding debt.
  • The debt term rescheduling shall be carried out until June 30th, 2022 instead of carrying out to December 31st, 2021 as before.

Secondly, amending the time limit for credit institutions and foreign bank branches shall decide reduction and exemption of debt interest and fees, according to their own rules and regulations, that arise before August 1st, 2021 (instead of June 10th, 2020) from credit-granting activities (except for purchasing of and investing in corporate bonds) whose principal and/or interest are due during the period from January 23th, 2020 to June 30th, 2022 (instead of December 31th, 2021) and the customers are not capable of fully paying the principal and/or interest on the schedule specified in the contract, or agreement due to decrease in revenue or income caused by Covid -19. 

At the same time, extending the time to exempting, reducing interest and fees for customers as mentioned above until June 30th, 2022 (extended by 06 months compared to before).

Thirdly, maintaining the classified debt type according to the regulations of the State Bank of Vietnam regarding the classification of debts arising in the operation of credit institutions, foreign bank branches for the debt balance which has been rescheduled the repayment debt term, and for the debt has been exempted or reduced arising from January 23th, 2020 to before August 1st, 2021.

  • Maintaining the classified debt type that is categorized on the latest day before the first rescheduling for the outstanding debt balance or overdue up to 10 (ten) days from the payment due date; 
  • Maintaining the classified debt type that is categorized on the latest day before the debt is transferred to overdue for the outstanding balance of (*) debt arising from January 23th, 2020 to before June 10th, 2020 and overdue before May 17th, 2021; and (**) debt arising from June 10th, 2020 to before August 1st, 2021 and overdue from July 17th, 2021 to before September 7th, 2021; 
  • Maintaining the classified debt type that is categorized on the latest day before the first reduction or exemption of interests on the outstanding debts arising before August 1st, 2021 from credit-granting activities (except for purchasing of and investing in corporate bonds) whose principal and/or interest are due during the period from January 23th, 2020 to June 30th, 2022 and the customers are not capable of fully paying the principal and/or interest on the schedule specified in the contract, or agreement due to decrease in revenue or income caused by Covid -19.

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This legal update is for general information only and is not a substitute for legal advice.