The State Bank of Vietnam has tightened lending rules, including a prohibition on credit institutions and foreign bank branches from disbursing loans in cash. Circular No. 21/2017/TT-NHNN, which stipulates the mode of disbursement of loans by credit institutions and foreign bank branches to customers, states that lenders must provide loans to a beneficiary’s bank account only via non-cash payment instruments. The new rule is effective from 2nd April 2018.

The disbursement of loans through bank accounts is aimed at assisting commercial banks in the supervision of the use of borrowers’ loans to avoid funds being used for incorrect purposes, such as rollovers, resulting in an increase of non-performing loans.

Under the new circular, lenders must disburse loans to a borrower’s bank account if it is required by law that money is to be transferred from the borrower’s bank account, and only in compliance with the purpose of the loans.

The disbursement through bank accounts is also required where the borrower has made payments in connection with business plans approved by the lenders, or where the borrower directly pays individuals or households for agricultural products, in compliance with the purpose of a loan.

Under the circular, lending institutions can disburse loans to the borrower in cash if the beneficiary does not have a bank account at any bank, or the borrower does not have a bank account at any bank and has made payments in connection with business plans approved by lenders.

The circular also allows exceptions to the non-cash disbursal of loans, such as where the amount to be paid to the beneficiary who has a bank account does not exceed VND100 million (US$4,400),  or where the borrower will make payments to a state-owned beneficiary and is permitted to use cash for such payments.

Link: http://congbao.chinhphu.vn/noi-dung-van-ban-so-21-2017-tt-nhnn-25880