New regulations on lending for outbound investment
15:25 | 06/01/2019
VGP – The volume of loans should  be agreed between lenders and customers (investors) but shall not exceed 70% of the customers' total offshore investment capital.

The State Bank of Viet Nam has issued Circular No.36/2018/TT-NHNN regulating lending operations by commercial banks, credit organizations and foreign bank branches to customers for offshore investment.

The Circular is scheduled to take effect since February 15, 2019, replacing the central bank’s previous Circular No. 10/2006/TT-NHNN dated on December 21, 2006.

The Circular specifies that commercial banks, credit organizations and foreign bank branches may consider lending to customers having capital demands in accordance with the investment forms stipulated in the Law on Investment, specifically as follows:

- (i) Contributing capital to establish an economic organization in accordance with the provisions of the recipient country’s investment law.

(ii) Purchasing a part or whole of the charter capital of an overseas economic organization to participate in managing and carrying out overseas business investment activities.

(iii) Contributing capital to perform Business Cooperation Contracts overseas.

(iv) Capital needs to carry out offshore investment in the forms specified at point dd of Paragraph 1, Article 52 of the Law on Investment.

Lending rates

The lending rates should  be agreed between lenders and customers (investors) but shall not exceed 70% of the customers' offshore investment capital.

The above provision aims to ensure that the customer/investor must arrange other capital sources such as their equity capital for the participation in the offshore investment project or plan, in order to reduce the risks for lenders.

The lending organizations have the rights and obligations to inspect and supervise the use of the loans and repayment of their customers in accordance with the legal provisions.

They also have the right to request the customers to report on the results of the operations and use of the loans, or provide documents to prove the use of the loans.

Who to be lent?

Investors shall have to meet the following conditions if they expect to get loans:

- (i) They shall have legal capability;

- (ii) Having been granted a certificate of offshore investment registration and their investment activities have been approved or licensed by the competent authority of the recipient country;

- (iii) Having an offshore investment project or plan which has been evaluated by the credit institution as feasible and customers are capable of repaying the loans;

- (iv) And having at least 2 consecutive years without bad debts up to the time of loan application./.

By Thuy Dung

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