Probationary period for debt to be transferred to a lower debt group

According to the State Bank of Vietnam , the determination of loan terms is carried out in accordance with the provisions of Circular 39/2016/TT-NHNN regulating lending activities of credit institutions and foreign bank branches to customers and amended and supplemented documents.

Circular 02/2023/TT-NHNN does not have any provisions on the probation period. The contents related to debt restructuring, debt classification, provisioning and use of reserves to handle risks not specified in this Circular shall be implemented according to the provisions of other relevant legal documents.

Therefore, regarding the probationary period for debt classification, credit institutions shall comply with the regulations of the Governor of the State Bank of Vietnam on asset classification, provisioning levels, risk provisioning methods and the use of provisions to handle risks in the operations of credit institutions and foreign bank branches.

Regarding loan terms, Circular 39 stipulates that credit institutions and customers shall agree on loan terms based on the business cycle, capital recovery period, customer's ability to repay, loan capital sources and remaining operating period of the credit institution.

For customers who are legal entities established and operating in Vietnam, legal entities established abroad and legally operating in Vietnam, the loan term shall not exceed the remaining legal operating period of the customer; for individuals with foreign nationality residing in Vietnam, the loan term shall not exceed the remaining permitted residence period in Vietnam.

Regulations on maintaining debt groups and debt classification, Circular 02 stipulates that credit institutions and foreign bank branches are allowed to maintain the debt groups for debts with principal and/or interest balances that are restructured for repayment terms as the debt groups that have been classified according to the regulations of the Governor of the State Bank of Vietnam on asset classification, provision levels, risk provisioning methods and the use of provisions to handle risks in the operations of credit institutions and foreign bank branches at the most recent time before restructuring the debt repayment term according to the provisions of Circular 02/2023/TT-NHNN.

In case the debt is still within the term, credit institutions do not have to apply the principle of adjustment and reclassification into a debt group with a higher risk level according to the regulations of the Governor of the State Bank of Vietnam on classification of assets, provisioning levels, methods of setting up risk provisions and the use of provisions to handle risks in the operations of credit institutions and foreign bank branches.

In case the debt is overdue according to the restructuring period but the credit institution or foreign bank branch does not continue to restructure the debt repayment period according to the provisions of Circular 02/2023/TT-NHNN, the credit institution or foreign bank branch must classify the debt according to the regulations.

For the interest receivable of the debt with restructured repayment period and maintained in the standard debt group (group 1) according to the provisions of Circular 02/2023/TT-NHNN, from the date of restructuring, credit institutions and foreign bank branches do not have to account for income (expected revenue) but monitor off-balance sheet to urge collection; account for income when collected according to the provisions of law on financial regime for credit institutions and foreign bank branches.

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