PROMULGATION OF REGULATION ON CLASSIFICATION OF DEBTS AT VIETNAM BANK FOR SOCIAL POLICIES

Article 1. Regulation on classification of debts at Vietnam Bank for Social Policies is promulgated together with this Decision

Article 2. This decision comes into force from the day on which it is signed

Article 3. Ministers, Heads of ministerial agencies, Heads of Governmental agencies, Presidents of the People’s Committees of provinces, the Chairperson of the Executive Board, General Director of Vietnam Bank for Social Policies are responsible for implementation of this Decision./.

 

CLASSIFICATION OF DEBTS AT VIETNAM BANK FOR SOCIAL POLICIES
(Promulgated together with Decision No. 976/QD-TTg dated July 01, 2015)

1. This Regulation deals with classification of debts at Vietnam Bank for Social Policies (hereinafter referred to as VBSP).

2. Debts classified under this Regulation include:

a) Debts received by VBSP upon its establishment from Agribank, State Treasury, and Vietinbank.

b) Loans granted by VBSP to the poor and other beneficiaries of incentive policies under regulations of the government and decisions of the Prime Minister.

c) Granted loans derived from investment trust under international agreements, decisions, or contracts with domestic and overseas entities.

In this Regulation, the terms below are construed as follows:

1. Debt: the debt balance of each of the loans mentioned in Clause 2 Article 1 of this Regulation.

2. Overdue debt: a debt whose principal has been overdue in part or in full.

3. Adjustment of repayment term: VBSP’s permission to change the term for repaying principal within the loan term agreed in the credit contract, provided the last repayment term remains unchanged.

4. Debt deferral: VBSP’s permission to defer the deadline for principal repayment to a later time than the deadline agreed previously in the credit contract.

5. Frozen loan: a loan whose repayment of principal may be delayed and payment of interest is exempt during the loan freezing period.

6. Clients: Organizations and individuals defined by law who have a credit relationship with VBSP.

1. VBSP must have solutions and regularly collect information about its customers in order to assess their solvency, take appropriate measures to control risk and credit quality, and classify debts in accordance with this Regulation.

2. VBSP must establish an IT system suitable for management of data and information about customers, risk management, and debt classification throughout its system.

1. VBSP shall classify debts in accordance with this Regulation, specifically:

- Every year on December 31 with regard to the debts mentioned in Clauses 1 to 9 in Article 6 of this Regulation.

- Every 03 years or whenever it is necessary for VBSP to with regard to the debts mentioned in Clauses 10 Article 6 of this Regulation.

2. Notwithstanding Clause 1 of this Article, Vietnam Bank for Social Policies may classify debts mentioned in this Regulation at the times that best serve its administration at that time.

VBSP shall classify debts according to their status under the criteria prescribed in Article 6 of this Regulation.

Classification of debts at VBSP varies according to the actual balance of each debt. If part of a debt is converted into overdue debt in a repayment period, only the converted amount is considered overdue, the remaining balance is still considered undue debts

VBSP shall classify debts according to certain criteria and by status. To be specific:

1. Classification of debts by loan program

Classification of debts by loan program depends on the criteria of the loan program under decisions of the Prime Minister, international agreements, decisions, or contracts with domestic and overseas entities in that period. VBSP shall classify debts as follows:

- Loans granted to poor households.

- Loans granted to students.

- Loans for creation of employments.

- Loans granted to beneficiaries of incentive policies working overseas for a certain period of time.

- Long-term housing loans granted to households in the Mekong Delta and Central Highlands (Tay Nguyen).

- Loans for clean water and environmental hygiene in rural areas.

- Housing loans for poor households.

- Loans under Project: Loans for Development of Medium and Small Enterprises (by KFW).

- Loans granted to business households in disadvantaged areas.

- Loans granted to extremely disadvantaged ethnic minorities.

- Loans granted to business establishments and enterprises employing detoxified drug users.

- Loans granted to poor and disadvantaged ethnic minorities in Mekong Delta.

- Loans granted to people doing business in disadvantaged areas.

- Loans granted to overseas workers from poor districts.

- Loans granted to poor and disadvantaged ethnic minorities.

- Loans for poor households to build shelters from floods.

- Loans granted to households living near poverty.

- Loans under Forestry Sector Development Project (by WB).

- Loans under Resource Management by the People (by IFAD) project in Tuyen Quang province.

- Loans under Rural Income Diversification Project (RIDP) in Tuyen Quang province).

- Loans under Coastal Wetlands Protection and Development Project (CWPD) in the South of Vietnam.

- Loans under Project “Expansion of access to finance of the disabled – small-scale sponsorships for business establishments hiring, serving the disabled, or owned by the disabled (by NIPPON).

- Other loans.

The Prime Minister shall direct adjustments to criteria for classification of debts by loan program.

2. Classification of debts by loan term

Debts shall be classified by loan term in each period. Debts are currently classified by VBSP as follows:

- Short-term loans: Loans with terms of up to 12 months.

- Middle-term loans: Loans with terms from > 12 months to 60 months.

- Long-term loans: Loans with terms from > 60 months.

The Prime Minister shall direct adjustments to criteria for classification of debts by loan term.

3. Classification of debts by status

- Undue debts are debts that are not due, deferred, or whose loan terms are adjusted.

- Overdue debts: debts are due but conditions for debt deferral are not satisfied and thus converted into overdue debts; debts are not due but the borrowers use the loan capital improperly, and debts are converted into overdue debts. Depending on the overdue duration, debts are classified as:

+ Debts up to 90 days overdue.

+ Debts 91 – 180 days overdue.

+ Debts 181 – 360 days overdue.

+ Debts over 360 days overdue.

- Frozen debts are debts during freezing period under a decision of a competent authority: the Prime Minister, the Chairperson of the Executive Board, local government, and other organizations.

4. Classification of debts by type of loan security

- Debts secured with property: any debt where the borrower’s liability is secured with collateral put up by the borrower, property derived from the loan, or property of a third party.

- Unsecured debts: Debts that are not secured with any property.

5. Classification of debts by source

- Loans granted by state budget or derived from state budget include: capital sources from state budget, raised capital, borrowed capital; non-refundable voluntary contributions by individuals, business organizations, financial institutions, credit institutions, socio-political organizations, associations, non-governmental organizations in Vietnam and overseas.

- Loans granted by trusted capital, including: Entrusted capital for concessional loans by local governments, business organizations, socio-political organizations, associations, non-governmental organizations, and individuals in Vietnam and overseas.

- Loans granted by other sources.

6. Classification of debts by loan method and trustee under an entrustment contract with VBSP.

- Direct loans.

- Direct loans with some entrusted contents, including:

+ Loans entrusted through Farmer Association.

+ Loans entrusted through Women Association.

+ Loans entrusted through War Veteran Association.

+ Loans entrusted through Communist Youth Union.

7. Classification of debts by area

- Loans granted in urban areas.

- Loans granted in rural areas.

8. Classification of debts by ethnic group

Debts are classified by VBSP according to the ethnic groups with at least 01 million members according to the result of population investigation at that time. Ethnic groups under the said criterion include:

- Kinh.

- Tày.

- Thái.

- Mường.

- Khmer.

- H’Mông.

- Other ethnic groups.

This criterion shall be adjusted under direction of the Prime Minister.

9. Classification of debts by economic sector

Debts are classified by VBSP according to some primary economic sector in each period. Debts are currently classified according to the following sectors:

- Agriculture, forestry, and aquaculture.

- Water supply, management and treatment of waste and wastewater.

- Construction.

- Wholesaling and retailing, repair of motor vehicles.

- Administration activities and ancillary services.

- Education and training.

- Other economic sectors.

Criteria for classification of debts by economic sector shall be adjusted under direction of the Prime Minister.

10. Classification of debts by customers’ solvency

a) Assessment method

Every 03 years or whenever necessary, VBSP shall review, analyze, and assess the ability its customers to pay each special debt, especially overdue debts, bad debts, undue debts that are irrecoverable, unpaid interest.

Assessment of solvency enterprise analysis of causes of insolvency shall be carried out in a public, democratic, and fair manner among borrowers under each credit program. Credit teams of communes and districts shall be established to carry out these tasks. According to the analysis and assessment of debt balance and analysis of causes of insolvency, the VBSP shall take appropriate measures to improve credit quality and avoid irrecoverable debts.

b) Criteria for classification

- Recoverable debts

+ Recoverable undue debts.

+ Recoverable overdue debts.

+ Recoverable frozen debts.

- Irrecoverable debts.

+ Irrecoverable undue debts.

+ Irrecoverable overdue debts.

+ Irrecoverable frozen debts.

c) Analysis of causes of customers’ insolvency

According to result of assessment of customers’ ability to pay overdue debts and irrecoverable undue debts, VBSP shall classify the causes into smaller groups. To be specific:

- Customers having objective difficulties according to the regulations on settlement of risky debts of VBSP in each period.

- Customers having from other difficulties that lead to insolvency such as: the overseas worker returns to Vietnam ahead of schedule without adequate documentary evidence; the borrower is sentenced to imprisonment without anyone paying debts on his/her behalf; the borrower is dead, missing, imprisoned, having particular living difficulties, or has left his/her hometown; the borrower suffers a loss or loses capital during the business operation process; the borrower’s family is sick or has an accident.

1. VBSP must have a unit specialized in management of debt classification at the headquarter to manage debt classification in accordance with this Regulation.

2. The debt classification unit has the responsibility to:

a) Provide information and cooperate with responsible units at the headquarter to expedite, manage, classify, and settle debts.

b) Submit reports on debt classification; propose measures for management, collection of debts, and settlement of irrecoverable debts to General Director and the Chairperson of the Executive Board of VBSP.

c) Propose measures for settlement of irrecoverable debts that are not regulated according to the result of debt classification to the State bank of Vietnam and the Ministry of Finance. Then the measures shall be proposed to the Prime Minister for consideration.

1. According to the result of debt classification, VBSP shall take charge and cooperate with the local government and socio-political organizations to take radical and comprehensive measures to collect debts and ensure efficiency of preferential capital sources.

2. General Director and the Chairperson of the Executive Board of VBSP are responsible for settling risky debts due to objective difficulties as prescribed by the government.

3. If irrecoverable debts classified according to Clause 10 Article 6 of this Regulation are still not collected after every possible measure has been taken, VBSP shall propose a solution to the State bank of Vietnam and the Ministry of Finance. The solution shall be then proposed to the Prime Minister for consideration.

VBSP submit reports on result of debt classification to the State bank of Vietnam and the Ministry of Finance as follows:

- The report on debt classification up to December 31 of the year shall be submitted every 01 year not later than January 31 of the succeeding year to the State bank of Vietnam and the Ministry of Finance under the criteria mentioned in Clauses 1 to 9 of Article 6 of this Regulation.

- Reports on debt classification prescribed in Clause 10 Article 6 of this Regulation shall be submitted to the State bank and the Ministry of Finance every 03 years or whenever it is necessary right after the classification debt is available. VBSP must establish an IT system and take technological measures to reduce the time for reviewing, analyzing, and assessing customers’ solvency. The target is reporting every 02 years.

1. The State bank of Vietnam is responsible for inspecting debt classification in accordance with this Regulation.

2. The State bank of Vietnam shall take charge and cooperate with the Ministry of Finance in appraising irrecoverable debts that are not regulated by law at the request of VBSP and submit it a report to the Prime Minister for consideration.

VBSP are responsible for organizing and providing guidance on implementation of this Regulation.

Ministers, Heads of ministerial agencies, Heads of Governmental agencies, Presidents of the People’s Committees of provinces, the Chairperson of the Executive Board and General Director of VBSP are responsible for the implementation of this Regulation.

Amendments and supplementation of the Regulation shall be decided by the Prime Minister at the request of VBSP.