On November 7, 2023, the Prime Minister issued Decree No. 78/2023/ND-CP ("Decree 78") amending and supplementing several articles of Decree No. 32/2017/ND-CP on state investment credit ("Decree 32"). Accordingly, ATA Legal Services has updated the following contents:
1. To supplement more projects to the list of investment credit loans at the Vietnam Development Bank ("VDB")
Decree 78 promulgates the list of projects permitted to borrow state investment loans, replacing the list in Decree 32. Accordingly, many projects are supplemented to the new category, including:
(i) For socio-economic infrastructure:
+ Investment projects on new construction, investment in expansion, renovation, and procurement of hospital equipment, higher education institutions (previously only projects on construction and investment in hospital expansion);
+ Investment projects on new construction, expansion, renovation, and upgrading of roads, railway works, inland waterports, seaports, and airports.
(ii) For agriculture and rural areas: adding to Infrastructure investment projects on the production of livestock breeds, aquatic breeds, and aquaculture.
(iii) For projects in areas with difficult economic and social conditions, especially those facing significant challenges: adding to projects include a non-coal thermal power project and an investment project in road infrastructure, bridges, railways, and railway bridges.
2. To remove some conditions for state investment loans
+ Remove conditions that other state financial institutions have not financed. Decree 78 allows all customers whose investment projects are on the list of projects to be entitled to state investment loans regardless of whether the other state financial institutions have financed them.
+ Remove two of the conditions on the purchase of property insurance and the implementation of accounting and auditing of financial statements.
This is considered a policy to support and remove difficulties for enterprises implementing projects in the process of implementing loan applications.
3. To keep the loan limit but supplement cases where loans are considered over the limit
Decree 78 additionally stipulates that in case a borrower or project is requested by VDB to grant credit, exceeding the loan limit of 15% for 1 customer and 25% for customers and related persons.
Conditions for over-limit loans:
- Satisfy the conditions for credit grant by relevant laws;
- No bad debts in the last 03 years immediately preceding the year of application for credit exceeding the limit;
- Having a liabilities ratio not exceeding 03 times the equity stated in the audited quarterly/annual financial statements at the time closest to the time of applying for credit beyond the limit;
- Having capital needs for the implementation of projects of socio-economic, defense, and security significance to perform tasks according to policies/programs and projects of the National Assembly and the Prime Minister.
4. VDB decides for itself the term and interest rate of investment credit loans
a. About loan term
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Decree 32 |
Decree 78 |
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The loan term is determined according to the project's ability to recover capital and the customer's ability to repay debts by production and business characteristics of the project but must not exceed 12 years. Particularly for group A projects, the maximum loan term is 15 years. VDB may decide on the loan term for each project based on the results of the project appraisal and the above conditions. In some special cases exceeding the loan term, VDB must submit it to the Prime Minister for consideration and decision. |
VDB may decide to provide loans for each project based on the results of project appraisal, production and business characteristics, the ability to recover capital of each project, and the ability of customers to repay debts. |
b. About loan interest rates
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Decree 32 |
Decree 78 |
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The interest rate to be loaned is calculated as the weighted average interest rate of the winning interest rates of VDB bonds guaranteed by the Government for a term of 01 year within 01 year before the time of announcement of the prescribed interest rate + ratio of operation management expenses and risk provision of VDB.
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VDB decided to ensure the principle of offsetting capital mobilization costs, apparatus operating expenses, and risk provision expenses for loans signed credit contracts from December 22, 2023, but not lower than 85% of the average lending interest rate of domestic commercial banks in the same period, the State budget does not provide interest compensation and management fees for these loans. - The interest rate shall be applied to all outstanding loans of the project during the term and new disbursements of investment credit loan contracts signed from December 22, 2023; - For the entire overdue principal balance of each loan: the maximum interest rate is equal to 150% of the term loan interest rate. |
5. Transitional provisions
- For post-investment interest rate support contracts signed before the effective date of Decree 78: the parties continue to comply with the signed contract.
- For investment credit loan contracts signed before the effective date of Decree 78:
+ In case the parties agree to adjust the contract under Decree 78: The State budget does not grant interest compensation and management fees for all outstanding loans and remaining disbursements (if any) of these credit contracts, accordingly, VDB appraises, evaluates, and takes responsibility for the ability, customer repayment plan.
+ In case the parties do not have an agreement: continue to comply with the signed contracts and be granted interest compensation and management fees by the State Budget. Particularly, the interest rate for the remaining disbursements from the effective date of Decree 78 shall apply the lending interest rate decided by VDB according to each disbursement.
- For investment credit loan contracts, export credit loan contracts signed before the effective date of Decree 78: VDB stops charging interest on late payment interest debts from the effective date of Decree 78 and writes off interest debts calculated on late payment interest debts that have not yet been collected until the time of stopping interest calculation for with late payment interest debt.
Decree 78 takes effect from December 22, 2023.
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