Vietnam to Tighten Cash Loan Disbursements from June 1

On April 10, 2012, the State Bank of Vietnam promulgated Circular 09/2012/TT-NHNN stipulating the payment methods for disbursing loans of credit institutions and foreign bank branches (hereafter collectively called “banks”) towards their customers. According to the Circular, banks will not use cash as a method for disbursing loans from June 1, 2012.

This regulation was issued in order to enhance non-cash payments and control the customers’ use of loans in line with the credit agreement.

Accordingly, banks are allowed to consider providing cash loans for some subjects instead of diversified methods including:

• To pay for receivers who are institutions with the maximum value below VND100 million per transaction;
• To pay for receivers who are individuals having current accounts at the credit institutions that provide payment service with the maximum value below VND100 million per transaction;
• To pay for the receivers who are individuals not having current accounts at the credit institutions that provide payment service;
• To compensate equity which borrowers used for investment, trading and production projects or plans for their lives;
• To be used for paying salary to employees;
• To transfer loans to customers’ current accounts for payment of other purposes that are required by law to be settled through current bank accounts of borrowers.

For other subjects, banks will not be allowed to use cash for disbursement.

This new circular takes effect from June 1, 2012.

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