CIRCULAR

GUIDELINES FOR PROVISION OF INTEREST RATE SUPPORT AND SUBSIDY ON INTEREST RATE DIFFERENCE FOR IMPLEMENTATION OF SUPPORTIVE POLICIES ON REDUCTION OF AGRICULTURAL LOSSES

Pursuant to the Government's Decree No. 215/2013/NĐ-CP dated December 23, 2013 defining the functions, tasks, entitlements and organizational structure of the Ministry of Finance;

Pursuant to the Prime Minister’s Decision No. 68/2013/QĐ-TTg dated November 14, 2013 on supportive policies on reduction of post-harvest losses in agriculture

At the request of the Director of the Financial Department of banks and financial institutions;

The Minister of Finance promulgates advertisement Circular on guidelines for provision of interest rate support and subsidy on interest rate difference for implementation of supportive policies on reduction of agricultural losses:

Article 1. Scope and regulated entities

1. Scope:

This Circular provides guidelines for conditions, documents, procedures for provision of subsidy on interest rate difference via commercial banks in order to grant loans according to Article 1 and Article 2 of Prime Minister’s Decision No. 68/2013/QĐ-TTg dated November 14, 2013 on supportive policies on reduction of post-harvest losses in agriculture (hereinafter referred to as Decision No. 68/2013/QĐ-TTg).

2. Regulated entities:

2.1 Commercial banks that are established, operating under the Law on credit institutions (hereinafter referred to as commercial banks) and grant loans according to Article 1 and Article 2 of Decision No. 68/2013/QĐ-TTg.

2.2 Relevant agencies, organizations, and individuals (hereinafter referred to as entities).

Article 2. Methods for providing loan interest rate support and subsidy on interest rate difference

1. Commercial banks that grant loans (hereinafter referred to as loaning banks) shall provide interest rate support or subsidy on the difference between commercial rate and concessional interest rate for investment in development of the State (hereinafter referred to as concessional interest rate) for the borrowers mentioned in Article 1 and Article 2 of Decision No. 68/2013/QĐ-TTg.

2. State budget shall provide subsidy on commercial interest rate or subsidy on the difference between commercial rate and concessional interest rate for the loaning banks as prescribed in Clause 1 of this Article.

Article 3. Conditions for receiving loan interest rate support and subsidy on interest rate difference from state budget

1. Commercial banks shall grant loans in accordance with Article 1, Article 2, and Article 4 of Decision No. 68/2013/QĐ-TTg and instructions of the State bank of Vietnam.

2. The loans receiving interest rate support and subsidy on interest rate difference are those that satisfy all of the following conditions:

2.1 The loans are granted to proper borrowers for proper purposes and satisfy all of the conditions mentioned in Article 1, Article 2, and Article 3 of Decision No. 68/2013/QĐ-TTg.

2.2 The loans are not overdue at the time of provision of interest rate support and subsidy on interest rate difference; overdue loans (principal and interest) shall not receive interest rate support and subsidy on interest rate difference from the due date.

2.3 The loans are granted under loan contracts with commercial banks signed during the period from the effective date of Decision No. 68/2013/QĐ-TTg to before December 31, 2020.

Article 4. Levels of support, subsidy, and sources of funding for provision of interest rate support and subsidy on interest rate difference

1. Levels of interest rate support and subsidy on interest rate difference:

1.1 With regard to loans for buying the machinery and equipment prescribed in Clause 2 Article 1 of Decision No. 68/2013/QĐ-TTg, 100% of interest rate shall be covered by state budget in the first 02 years and 50% in the third year. The beginning date of provision of interest rate support for each loan is the disbursement date.

1.2 With regard to loans for execution of projects of investment in lines of machinery and equipment; projects for manufacture of machines and agriculture equipment prescribed in Clause 3 Article 2 of Decision No. 68/2013/QĐ-TTg, state budget shall provide subsidy on the difference between commercial rates of commercial banks and concessional interest rates of the State. The beginning date of for provision of subsidy on interest rate difference for each loan is the disbursement date.

The period of subsidy on interest rate difference is the same as the loan term prescribed in Clause 5 Article 2 of Decision No. 68/2013/QĐ-TTg. Nevertheless, this period shall not exceed 12 years.

1.3 The loan interest rates of commercial banks that are the basis for state budget to provide interest rate support and subsidy on interest rate difference are the minimum interest rates imposed by commercial banks on the loans serving agriculture and rural areas with the same term and period and posted at transaction places by such commercial banks.

1.4 The concessional interest rate of the State that is the basis for provision of subsidy on interest rate difference prescribed in Article 2 of Decision No. 68/2013/QĐ-TTg is the concessional interest rate announced by the State in each period.

2. Sources of funding for provision of interest rate support and subsidy on interest rate difference:

Funding for provision of interest rate support and subsidy on interest rate difference serving implementation of policies on reduction of agricultural losses is part of the estimated annual expenditure on provision of subsidy on interest rate difference (derived from capital for development investment) of state budget.

Article 5. Documents and procedures for provision of interest rate support and subsidy on interest rate difference

1. Making the plan for provision of interest rate support and subsidy on interest rate difference:

Not later than July 31 every year, every commercial bank shall formulate a plan for provision of interest rate support and subsidy on interest rate difference of the planned year (divided by into 4 quarters) based on the anticipated balance of plans for purchase of machinery and equipment serving agricultural production of the next year, then send it to the Ministry of Finance and the Ministry of Planning and Investment.

In 2014, within 15 days from the effective date of this Circular, commercial banks shall make and send their plans for provision of interest rate support and subsidy on interest rate difference to the Ministry of Finance and the Ministry of Planning and Investment.

The Ministry of Planning and Investment shall take charge and cooperate with the Ministry of Finance in estimating expenditure on provision of subsidy on interest rate difference of central government budget in order to provide subsidy for commercial banks to grant loans serving implementation of policies on reduction of agricultural losses.

2. The plan for provision of interest rate support and subsidy on interest rate difference shall be made according to the formula below:

2.1. Supported interest rate:

a) With regard to existing loan balance (including the estimated amount by December 31 of the year preceding the planned year):

Where:

- Average loan balance is calculated by the commercial bank on the basis of the average loan balance.

- Average concessional interest rate which equals (=) 100% of average interest rate of the commercial bank in the first 2 years, 50% of the average interest rate of the commercial bank in the third year shall be determined according to Clause 1 Article 4 of this Circular.

b) With regard to loan balance expected to arise in the planned year:

Where:

- Estimated average loan balance of the subsidy year is the arithmetic mean of the opening balance and ending balance of the planned year.

- Average concessional interest rate which equals (=) 100% of average interest rate of the commercial bank in the first 2 years, 50% of the average interest rate of the commercial bank in the third year shall be determined according to Clause 1 Article 4 of this Circular.

2.2. With regard to subsidized interest rate:

a) With regard to existing loan balance (including the estimated amount by December 31 of the year preceding the planned year):

Where:

- Average existing loan balance that is subsidized is calculated by the commercial bank on the basis of the average existing loan balance.

- The difference in average interest rates is the difference between average interest rate of the commercial bank and concessional interest rate of the State which is the arithmetic mean of the interest rates at the beginning and at the end of the year.

b) With regard to loan balance expected to arise in the planned year:

Where:

- Estimated average loan balance of the subsidy year is the arithmetic mean of the loan balance at the beginning and at the end of the planned year.

- The difference in average interest rates is the difference between average interest rate of the commercial bank and concessional interest rate of the State which is the arithmetic mean of the interest rates at the beginning and at the end of the year.

3. Temporary provision of quarterly loan interest rate support and subsidy on interest rate difference:

Within 30 days from the receipt of the quarterly report prescribed in Clause 1 Article 6 of this Circular, which is enclosed with the written request of the commercial bank, the Ministry of Finance shall provide a temporary funding of 80% of last quarter’s interest rate support of the bank, provided the accumulated temporary funding from the beginning of the year does not exceed the estimate given at the beginning of the year. If temporary funding is not provided, the Ministry of Finance shall make a written response and provide instructions for commercial banks within 20 working days.

4. Methods for determination of supported interest and subsidized difference in interest:

4.1 With regard to the loans eligible for interest rate support prescribed in Article 1 of Decision No. 68/2013/QĐ-TTg:

a) The amount of supported interest on a loan is calculated using the formula below:

Where:

- The concessional interest rate is prescribed in Clause 1 Article 4 of this Circular and expressed as % month.

- n is the number of supported loaning days in the period.

b) Supported interest of the commercial bank is the total supported interest on the loans eligible for support.

c) Commercial banks shall use the formula above to determine the amount of subsidy on interest to be provided by the Ministry of Finance.

4.2 With regard to the loans eligible for subsidy on interest rate difference prescribed in Article 2 of Decision No. 68/2013/QĐ-TTg:

a) The amount of subsidized difference in interest on a loan is calculated using the formula below:

Where:

- The subsidized difference in interest rates is prescribed in Clause 1 Article 4 of this Circular and expressed as % month.

- n is the number of supported days in the period.

b) Subsidized difference in interest of the commercial bank is the total subsidized interest on all the loans eligible for subsidy prescribed in Point 4.2a of this Article.

c) Commercial banks shall use the formula above to determine the difference in interest to be subsidized by the Ministry of Finance.

5. Statement of interest rate support and subsidy on interest rate difference:

5.1 Within 90 days from the end of the fiscal year, commercial banks must send applications for statements of interest rate support and subsidy on interest rate difference to the Ministry of Finance. If documents are not adequate or invalid, the Ministry of Finance shall notify state-owned commercial banks in writing within 10 working days.

5.2 Application for statement:

a) Application for statement of loans provided with interest rate support:

- An overall report on the statement of interest rate support audited by an independent audit firm or State Audit Agency (Appendix 1 enclosed herewith).

- Report of each province on statement of interest rate support (Appendix 2 enclosed herewith).

b) Application for statement of loans provided with subsidy on interest rate difference:

- An overall report on the statement of subsidy on interest rate difference according to concessional interest rate audited by an independent audit firm or State Audit Agency (Appendix 3 enclosed herewith).

- Report of each province on statement of subsidy on interest rate difference according to concessional interest rate (Appendix 4 enclosed herewith).

5.3 Commercial banks shall make backups of documents and reports by each support in an accurate and transparent way in order to facilitate inspection of statement of interest rate support and subsidy on interest rate difference prescribed in Point 5.4 of this Article.

5.4 Inspection of statements of interest rate support and subsidy on interest rate difference:

a) The Ministry of Finance shall inspect statements of interest rate support and subsidy on interest rate difference after receiving the satisfactory application for statement of interest rate support and subsidy on interest rate difference.

b) The Ministry of Finance shall send written notifications to branches of the commercial bank appointed to inspect the statement.

c) Commercial banks have the responsibility to provide documents by each loan and branch to serve inspection, including:

- Credit contracts, indentures and equivalent documents to determine borrowers and loan status.

- List of products to determine interest rate support and subsidy on interest rate difference.

- Borrowers’ confirmations of interest rate support and subsidy on interest rate difference by year which specify every time of support in any shape or form.

- Written notification of lowest interest rate which is the basis for approving statements of interest rate support and subsidy on interest rate difference.

The aforementioned documents are photocopies bearing the certifying seal of commercial banks, signatures and names of responsible persons.

d) The inspection of statements of interest rate support and subsidy on interest rate difference shall be done within 90 days from the receipt of the satisfactory applications from commercial banks

5.5 Processing differences between the statement and the temporary interest rate support and subsidy on interest rate difference:

- In case there are differences between the statement which is certified by an auditing organization and the statement inspected by the Ministry of Finance, the commercial bank shall adjust its accounting books to show the accurate interest rate support and subsidy on interest rate difference.

- If the temporary interest rate support and subsidy on interest rate difference provided by state budget is higher than that in the inspection record, the difference shall be withdrawn by the Ministry of Finance.

- If the temporary interest rate support and subsidy on interest rate difference provided by state budget is lower than that in the inspection record, the difference shall be provided by state budget.

- The difference shall be processed within 45 days from the receipt of inspection record.

- The Minister of Finance shall consider deciding extension of the processing period where necessary and other special cases.

6. Withdrawal of interest rate support and subsidy on interest rate difference:

- During the support period, if the commercial bank finds that the borrower commits violations while using the loan, it shall be converted into an ordinary loan and the advance support provided by the bank shall be immediately withdrawn.

- If the borrower’s violations are discovered after the statement is made by regulatory agencies, the commercial bank shall withdraw the support provided by the State and return it to state budget.

- If the interest rate support cannot be recovered by the commercial bank after all necessary measures are taken, the commercial bank shall submit a report to the Ministry of Finance for guidance.

Article 6. Reporting

1. Quarterly reports:

Every quarter (not later than the 30^th of the first month of the next quarter), commercial bank shall collect figures about interest rate support of the policies on reduction of agricultural loses of the whole system, assess the implementation and send a report to the Ministry of Finance.

2. Annual reports:

Within 90 days from the end of the fiscal year, commercial banks shall send annual report to the Ministry of Finance, including:

- The temporary interest rate support and subsidy on interest rate difference provided in the year.

- The actual interest rate support and interest rate difference to be subsidized in the whole year.

- The application for statement prescribed in Point 5.2 Article 5 of this Circular.

Article 7. Transition

1. With regard to the loans provided with interest rate support and subsidy on interest rate difference under Decision No. 68/2013/QĐ-TTg, Decision No. 65/2011/QĐ-TTg still apply regulations on levels, sources, documents, and procedures for interest rate support and subsidy on interest rate difference, and reporting in Circular No. 188/2012/TT-BTC of the Ministry of Finance.

2. This Circular shall apply to the loans that are granted from the effective date of Decision No. 68/2013/QĐ-TTg and eligible for interest rate support and subsidy on interest rate difference according to Decision No. 68/2013/QĐ-TTg.

Article 8. Effect and implementation

1. This Circular comes into force from August 22, 2014.

2. Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Finance for consideration./.