The State Bank of Vietnam issued Circular No. 08/2023/TT-NHNN (“Circular 08/2023”) stipulating conditions for non-government guaranteed foreign loans. Circular 08/2023 takes effect from 15 August 2023, with several notable contents as follows:

1. Purpose and limitation of loan for non-credit institution borrowers

Circular 08/2023 stipulates different conditions for non-credit institution borrowers compared to credit institution borrowers. Accordingly, the purposes and limits for non-credit institution borrowers are specified as follows:

1.1. For short-term loans (loan term up to one year), the borrower can take a foreign loan for the following purposes:

1. Restructuring its foreign debts and paying its short-term debts payable in cash (excluding outstanding principal amounts of domestic loans). Short-term debts payable are those incurred by the borrower during its execution of investment projects, business plans, and/or other projects, and are determined under current regulations and guidelines on corporate accounting policies; and
2. Using the short-term foreign loan capital for its business operations with a maximum duration of 12 months from the day on which the foreign loan capital is withdrawn when the borrower is required to achieve minimum levels of prudential indicators as prescribed by specialized laws (i.e. securities companies).

1.2. For medium and long-term loans (loan term of more than 01 years), the borrower can borrow abroad for the following purposes:

1. Implementing the borrower’s investment projects (those projects granted an investment certificate, an investment registration certificate, or a written approval of an investment policy);
2. Implementing production, business plans, and other projects of the borrower; and
3. Restructuring foreign debts of the borrower.

2. Using the unused amounts:

Under Circular 08/2023, if a loan has been drawn down but temporarily unused for lawful foreign borrowing purposes, the borrower may use this money to deposit at credit institutions or foreign bank branches operating in Vietnam. The maximum term of each deposit must not exceed 01 month.

3. Foreign loans in Vietnamese Dong:

3.1. A foreign loan in Vietnamese Dong (“VND”) means a foreign loan that is disbursed to the borrower’s account used for foreign borrowing and debt repayment in VND or for which debt obligations are denominated in VND;

3.2. A foreign loan in VND shall be granted if:

1. The borrower is a microfinance institution;
2. The borrower that is a foreign-invested enterprise gets a loan from profits earned from direct investments in the territory of Vietnam by the lender that is the foreign investor making a capital contribution to the borrower; or
3. The borrower withdraws loan capital and pays debts in foreign currency but debt obligations are denominated in VND.

4. The limit on foreign loans:

1. The foreign loan is used for executing an investment project: The sum of outstanding principal amounts of the borrower’s medium/long-term domestic and foreign loans (including short-term loans that are extended and overdue short-term loans that are treated as medium/long-term loans) used for executing its investment project shall not exceed the limit on borrowed capital of that investment project;
2. The foreign loan is used for executing business plans or other projects of the borrower: The sum of outstanding debts of the borrower’s medium/long-term domestic and foreign loans (including short-term loans that are extended and overdue short-term loans that are treated as medium/long-term loans) used for this purpose shall not exceed total demand for borrowed capital defined in its plan for use of foreign loan capital approved by an authorized approving authority;
3. The foreign loan capital is used for restructuring the foreign debts of the borrower: The maximum foreign loan amount used for restructuring the borrower’s foreign debts shall not exceed the sum of outstanding principal, unpaid interest, and relevant expenses of the existing foreign loan, and expenses associated with the new loan determined when restructuring its foreign debts.