DECISION

ON THE IMPLEMENTATION OF MECHANISM OF NEGOTIABLE INTEREST RATES IN VND COMMERCIAL CREDIT ACTIVITIES OF CREDIT INSTITUTIONS FOR CUSTOMERS

THE GOVERNOR OF THE STATE BANK

Pursuant to the Law on the State Bank of Vietnam and Law on the Credit Institutions dated 12 December, 1997;
Pursuant to the Decree No. 15 CP dated 02 March, 1993 of the Government on the assignment, authority and responsibility for the State management of the ministries and ministry-level agencies;
Based on the direction of the Prime Minister stated in the Dispatch No. 28/CP-KTTH dated 27 May, 2002 on the implementation of mechanism of negotiable interest rates in VND commercial credit;
Upon the proposal of the Director of the Monetary Policy Department,

DECIDES

Article 1.

1. To perform the mechanism of negotiable interest rates in VND commercial credit activities of credit institutions for customers. Credit institutions shall determine the lending interest rate in Vietnam Dong on the basis of supply and demand in the capital market and creditability of borrowers who are Vietnamese entities and individuals, foreign entities and individuals operating in Vietnam.

2. The State Bank of Vietnam shall continue to announce the base interest rate on the basis of taking reference to commercial lending interest rates for best customers applied by a group of credit institutions which are selected in accordance with the Decision of the Governor of the State Bank from time to time for reference and orientation of market interest rates, in accordance with provisions of the Law on the State Bank of Vietnam; at the same time the State Bank of Vietnam shall take the initiative to apply measures to control the development of market interest rates and to meet requirements and objectives of the monetary policy from time to time.

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At the effective time of this Decision, the outstanding loans and credit contracts which have been entered into but not fully disbursed or not yet disbursed shall continue to be subject to the lending interest rate stated in respective credit contracts. The adjustment of the lending rates for those credit contracts shall be agreed upon by credit institutions and borrowers.

2. The lending interest rate applicable to overdue principals shall be performed in accordance with provisions in paragraph 2 Article 11 the Regulation on lending by credit institutions to customers issued in conjunction with the Decision No. 1627/2001/QD-NHNN dated 31 December, 2001 of the Governor of the State Bank of Vietnam.

3. Credit institutions shall perform the preferential lending interest rates applicable to underprivileged persons in accordance with current provisions of the Prime Minister and the State Bank of Vietnam.

Article 3.

1. This Decision shall be effective from 1 June, 2002

2. Legal documents issued by the Governor of the State Bank of Vietnam which cease their effectiveness shall include: Decision No. 241/2000/QD-NHNN1 dated 2 August, 2000 on the change of operational mechanism of lending interest rates of credit institutions for customers; Decision No. 242/2000/QD-NHNN1 dated 2 August, 2000 on the announcement of the base interest rate as a basis for the determination by credit institutions of the lending interest rate in Vietnam Dong for customers; Decision No. 50/2000/QD-NHNN1 dated 3 February, 2000 on the adjustment of lending interest rates in Vietnam Dong of the local Peoples credit fund for members.

3. Heads of units of the State Bank, General Manager of State Bank branches in provinces, cities, Chairpersons and General Directors (Directors) of credit institutions shall be responsible for the implementation of this Decision.

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