On 14 April 2010 the State Bank of Vietnam ("SBV") issued Circular No. 12/2010/TT-NHNN allowing commercial banks to apply negotiable interest rates on short-term loans ("Circular 12").
Circular 12 allows credit institutions to provide VND loans at negotiated interest rates to clients for capital requirements for efficient projects and plans for development of production, business, services, investment and daily living.
Credit institutions must publicly list their interest rates at a reasonable level, based on supply and demand on capital markets and the capital requirements and credit ratings of borrowers, saving operational costs and facilitating clients to access loan capital for development of production and business especially in rural and agricultural areas, and by export enterprises and by medium and small enterprises.
Credit institutions must also amend interest rates in conformity with the level of fluctuation of interest rates for raising VND capital and the SBV's objectives and solutions to operate the monetary policy.
Credit institutions must report to the SBV on their VND lending interest rates and their documents on lending interest rates immediately after they issue any such document.
Circular 12 takes effect from 14 April 2010.
On this effective date the following provisions of the SBV on interest rates on VND loans by credit institutions to clients cease their validity: Circular 07/2010/TT-NHNN dated 26 February 2010 on lending by credit institutions at interest rates negotiated with clients, and its implementing guidelines; provisions on loan interest rates in Decision 16/2008/QD-NHNN dated 16 May 2008 on the mechanism for operating the basic interest rate in VND; and Decision 33/2008/QD-NHNN dated 3 December 2008 on interest rates on VND loans made by people's credit funds to clients.
Loan contracts signed prior to 14 April 2010 will continue to be performed by the credit institution and the client in accordance with the provisions of such contract, or the credit institution and the client may agree to amend or supplement such contract for compliance with Circular 12 and other relevant laws.
The SBV's Head of the Office, the Director of the Department for Monetary Policy, heads of SBV entities, directors of provincial SBV branches, chairmen of boards of management and general directors (directors) of credit institutions and borrowers are responsible for implementation of Circular 12.