On 4 May 2012, the State Bank of Vietnam (SBV) issued Circular No. 14/TT-NHNN (Circular 14) regulating the maximum VND short-term lending interest rate offered by credit institutions and foreign bank branches (collectively "credit institutions") to borrowers in four economic sectors.

Under Circular 14, the maximum VND short-term lending interest rate shall be the maximum interest rate applicable to VND deposits with a term of one month or more as set out by the SBV (currently 12% as from 11 April 2012) plus (+) 3% per year.

Short-term VND loans to which the maximum rate applies as mentioned above shall be applicable to borrowers in one of the following categories: 

  • in the sector of agriculture and rural development as stipulated in Decree No. 41/2010/ND-CP of the Government dated 12 April 2010 on credit policies in service of agricultural and rural development;

  • business production for exports as specified in the Commercial Law;

  • for production and trading by small- and medium-sized enterprises as stipulated in Decree No. 56/2009/ND-CP of the Government dated 30 June 2009 on assistance for development for small- and medium-sized enterprises; and

  • for developing support industries as stipulated in Decision No. 12/2011/QD-TTg of the Prime Minister dated 24 February 2011 on the policy on development of a number of support industries. 

Credit institutions must publicly list their interest rates for loans and the criteria for eligible borrowers pursuant to Circular 14. Borrowers eligible for the lending rate stipulated in Circular 14 means borrowers satisfying the borrowing conditions as stipulated in the SBV regulations on lending activities to customers and who are rated financially transparent and sound by the lending credit institutions.

Borrowers must provide information and data proving that their borrowing purpose falls within the above preferential sectors and must be liable for the truthfulness and accuracy of the information and data they provide.

Circular 14 took effect as from 8 May 2012.

The interest rate on any loan contract entered into prior to 8 May 2012 may continue to be implemented pursuant to such loan contract and the law applicable at the time of signing.

Other types of VND loans (other than those falling in one of the four preferential sectors) shall be made by credit institutions at negotiated interest rates as stipulated in Circular No. 12/2010/TT-NHNN of the SBV dated 14 April 2010.

For inquiries related to this Legal Update, please contact Hoang Anh Nguyen, Mai Phuong NguyenCuong Nguyen or your usual contacts with our firm.