Circular No. 08/2023/TT-NHNN issued  30 June, 2023 covering eligibility requirements for foreign loans without Government guarantees, will officially take effect on 15 August 2023. This Circular replaces Circular 12/2014/TT-NHNN (“Circular 12”) which has the following highlights:

This Circular applies to:

1. Residents that are enterprises, cooperatives, cooperative unions, credit institutions and foreign bank branches (FBBs) duly established and operating in Vietnam and known as the parties applying for foreign loans (hereinafter referred to as “borrowers”).
2. Credit institutions or FBBs in Vietnam where borrowers’ accounts are opened to serve their foreign borrowing and repayment of foreign loan debts (hereinafter referred to as “account service banks”).

Foreign short-term loans for borrowers who are credit institutions or foreign bank branches:

According to Article 14 of Circular 08 for loan purposes

• Supplementing capital for credit extension activities according to growth credit of the borrower
• Restructuring the foreign debt of the borrower

For borrowers being commercial banks: 30% of the total principal balance of short-term foreign loans

For the borrower being a branch of a foreign bank or other credit institution: 150% of the total principal balance of short-term foreign loans

For the case where the borrower is not a credit institution and foreign bank branch, Article 18 of Circular 08/2023/TT-NHNN stipulates the foreign loan limit as follows:

Firstly, in case of borrowing from abroad to implement an investment project, two conditions must be satisfied, including:

• Condition 1 is the principal balance of the borrower’s medium- and long-term domestic and foreign loans (including short-term loans extended and short-term overdue to medium and long-term) serving for an investment project shall not exceed the loan limit of the investment project.
• Condition 2 is that the loan limit of an investment project specified at Point a, Clause 1, Article 18 is the difference between the total investment capital of the investment project and the investor’s contributed capital recorded in the Investment Certificate. investment, investment registration certificate, written approval of investment policy.

Secondly, in case of foreign loans to implement production, business and other projects of the borrower, the balance of medium and long-term domestic and foreign loans of the borrower (including short-term loans are extended, and short- term loans are overdue to medium and long-term) for this purpose, not exceeding the total loan demand in the plan on using foreign loans approved by competent authorities in accordance with regulations provisions of the law.

Thirdly, the case of a foreign loan to restructure the borrower’s foreign debt. Accordingly, the maximum amount of foreign loans for the purpose of restructuring foreign debts must not exceed the total value of the principal balance, the amount of interest, unpaid fees of the existing foreign debt and the fees of new loans are determined at the time of structure.

In case the new foreign loan is a medium or long-term loan, within 05 working days from the date of withdrawal of the new loan, the borrower must repay the existing foreign loan so that after 05 working days working days mentioned above, the borrower guarantees the loan limit.

Short-term foreign loans are not subject to regulations on foreign borrowing limits in the following cases: foreign loans to implement investment projects; foreign loans to carry out production, business and other projects of the borrower

Foreign loans in the form of goods import deferred payment:

1. Borrowers of foreign loans which are granted in the form of import of goods with deferred payment are not required to meet the eligibility requirements for foreign loans laid down in this Circular.
2. 2. Borrowers of foreign loans which are granted in the form of import of goods with deferred payment shall comply with regulations and guidelines on management of foreign exchange in foreign borrowing and foreign debt repayment by enterprises, regulations of law on foreign trade management and other relevant law provisions.

Three situations in which foreign loans in VND are accepted:

• The borrower is a microfinance institution;
• 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 capital contribution to the borrower; or
• The borrower withdraws loan capital and pays debts in foreign currency but debt obligations are denominated in VND.