VIETNAM BANK FOR

SOCIAL POLICIES

SOCIALIST REPUBLIC OF VIETNAM

Independence Freedom - Happiness

No: 15/Q-HQT

Hanoi,, 27 January 2011

DECISION
Regulation on handling non-performing loans in Vietnam Bank for Social
Policies

THE CHAIRPERSON OF THE BOARD OF DIRECTORS

OF VIETNAM BANK FOR SOCIAL POLICIES
Pursuant to Decree No. 78/2002/N-CP dated 04 October 2002 of the Prime
Minister on credit to the poor and other policy beneficiaries;
Pursuant to Decision No.180/2002/Q-TTg dated 19 December 2002 of the
Prime Minister on regulation on financial management mechanism applicable to
Vietnam Bank for Social Policies;
Pursuant to Decision No.50/2010/Q-TTg dated 28 July 2010 of the Prime
Minister on regulation on handling non-performing loans managed by Vietnam Bank
for Social Policies;
Pursuant to Circular No.161/2010/TT-BTC dated 20 October 2010 of the
Minister of Finance on Guidance to execute the financial management mechanism
of Vietnam Bank for Social Policies, enclosed with Decision No.50/2010/Q-TTg
dated 28 July 2010 of the Prime Minister;
At the request of the General Director of Vietnam Bank for Social Policies,

DECIDES
Article 1. The decision is issued and enclosed with Regulation on
handling non-performing loans in Vietnam Bank for Social Policies (VBSP)
Article 2. This Decision will come into effect since the signing date
and replace Decision No.55/2005/Q-HQT dated 24 February 2006 of the
Chairperson of the Board of Directors on regulation on handling nonperforming loans in VBSP.
For the loans which are at risk due to objective reasons occurred before
the effective date of this Decision and are still pending will be treated under the
regulation enclosed with this Decision.
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Article 3. The General Director, Directors of functional Departments

and centers at the Headquarters, Director of the Transaction Center, Directors
of provincial branches, Directors of district transaction offices and VBSPs
clients are responsible to implement this Decision ./.
CHAIRPERSON
OF THE BOARD OF DIRECTORS

(Signed)

Nguyn Vn Giu

VIETNAM BANK FOR

SOCIAL POLICIES

SOCIALIST REPUBLIC OF VIETNAM

Independence Freedom - Happiness

REGULATION
On handling non-performing loans in Vietnam Bank for Social Policies
(Enclosed with Decision No. 15/Q-HQT dated 27 January 2011 of the
Chairperson of the Board of Directors of VBSP)

Chapter I
GENERAL PROVISION
Article 1. Applicable subjects
1. Clients borrowing from VBSP in accordance with the Decision No.
78/2002/ND-CP dated on October 4th 2002 by the Government on
preferential credit for the poor and other policy beneficiaries and with other
relevant legal documents, including:
a) Poor households;
b) Disadvantaged students;
c) Beneficiaries borrowing from the National Job Fund;
d) Workers working abroad for definite terms;
) Beneficiaries of lending program for rural water supply and
environment sanitation;
e) Productive & business households in disadvantaged areas;
g) Extremely disadvantaged ethnic minority households;
h) Beneficiaries of lending program for housing purposes in areas listed
in the decisions of the Prime Minister;
i) Traders in disadvantaged areas;
k) Others as mandated by the Prime Minister.
2. Relevant organizations and individuals involved in VBSPs activities
of providing preferential credit to the poor and other policy beneficiaries.
Article 2. Rules for handling non-performing loans
1. Consideration for handling non-performing loans will be only carried
out under the following conditions:
a) Eligible borrowers as stated under the prevailing regulations and have
utilized loans for the right and committed purpose;
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b) Clients suffer partial or entire losses of capital and assets due to

objective reasons;
c) Clients meet with financial difficulties that make them unable to pay
back the debt.
2. Each case will be handled separately and accordingly in terms of risk
reasons, risk scope, repayment capacity of the borrowers, in the way to ensure
sufficient and proper legal records, procedures conformity as well as
objectivity and equality among borrowers.
Article 3. Scope of handling non-performing loans
1. The Regulation stipulates handling non performing loans due to
objective reasons for borrowers of VBSP.
2. For non performing loans by institutions and individuals due to
subjective reasons, the borrower shall have to compensate for damages or
losses in compliance with the law.
3. For loans borrowed by the poor and other policy beneficiaries from
trust funds under agreements and contracts signed between VBSP and local
and foreign institutions and individuals, the risky loans shall be processed in
accordance with such agreements and contracts.
4. As for clients borrowing from VBSP with guaranteed assets and
insurance certificate:
a) In case loans from VBSP with guaranteed assets as regulated are at
risk due to objective reasons, VBSP is entitled to actively handle the
guaranteed assets under the agreement with clients and in accordance with the
law to collect the debt. The amount collected will be used to cover
expenditures for processing guaranteed assets; repayment of the principal and
interests to the bank and the remain (if any) will be given back to the client. If
this amount is not enough to cover those costs, the deficit will be treated as
non-performing loans in accordance with the regulations of this document.
b) In case insured assets of VBSPs borrowers (guaranteed assets,
plants, poultry and livestock and other assets) are at risk, the NPLs will be
treated under the insurance contract. The amount compensated by the
insurance company to VBSPs clients will be used to pay back the principal
and interests to the bank, the remain (if any) will be given back to the clients.
If this amount is not enough to pay back the debt, the deficit will be treated as
non-performing loans in accordance with the regulations of this document.
Article 4. Time for consideration of non-performing loans
1. Measures for non performing loans is carried out since the occurring
date of risk due to objective reasons.
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2. Consideration for handling non performing loans due to objective

reasons is implemented at the actual time risks occurred or periodically based
on requests from borrowers, from VBSP and on approvals of competent
agencies.
Every six months at the latest, VBSP provincial branch shall collect
applications for handling non performing loans from borrowers and send to
the Headquarters for classification, then the Headquarters will submit to
competent agencies for consideration and final decision.
Chapter II
SPECIFIC PROVISIONS
Article 5. Objective reasons
1. Objective reasons regulated in Item 1, Article 5 in the Regulation
enclosed with Decision No.50/2010/Q-TTg include:
a) Natural disasters and climate changes causing losses of capital and
assets of clients, including: flood, drought, earthquake, land slide, fire and
forest fire, war.
b) Epidemics of poultry, livestock, aquatic species and plants.
2. Subjective reasons regulated in Item 2, Article 5 in the Regulation
enclosed with Decision No.50/2010/Q-TTg include:
a) Policy changes made by the Government which directly lay bad
impact on production and business of the clients, such as: extinction of
materials resources, the products are forbidden or restricted under the laws or
the clients have to change their business and production under new
regulations of the state authorities.
b) Political, socio-economic changes in the world, in the region and in
the country where Vietnamese labourers are working which directly affect
them as migrant workers, such as: bankruptcy or dissolution of the enterprise
where the migrant workers are working for; unemployment due to unilateral
ending of the labour contract of the enterprise suffering from economic crisis.
3. Subjective reasons regulated in Item 3, Article 5 in the Regulation
enclosed with Decision No.50/2010/Q-TTg include:
The borrowers, disadvantaged students or migrant workers borrowing
money under the household lending approach: loss their civil capacity; suffer
from regular physical illness, mental illness; are extremely disadvantaged and
helpless; died, are missing or are declared dead or missing without any asset
or inherit for repayment or the heir is unable to pay back the debt.
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4. Subjective reasons regulated in Item 4, Article 5 in the Regulation

enclosed with Decision No.50/2010/Q-TTg include:
The borrowers are legal entities and/or economic organizations which
effectuate the decision to be dissolved or go bankrupt according to the law
and have not any capital and/or asset to pay back the debt.
Article 6. Determining the loss scale of capital and asset
1. When a borrower suffered from risk due to objective reasons and has
the application for handling NPLs, VBSP will collaborate with relevant
individuals and organizations to take appraisal, prepare a minute on loss scale
of capital and assets of the borrower.
2. The minute on loss scale of capital and asset is certified by local
VBSP, leader of savings and credit group (or the project leader); management
officer of entrusted mass organizations at commune level; chairperson of the
Commune Peoples Committee, competent and relevant agencies at
commune level (if any) such as: veterinary division or flood prevention
division.
3. The loss scale (percentage) of capital and asset for NPLs handling will
be determined based upon the real losses due to objective reasons (which is
certified by competent agencies) in comparison to the total fund for
production and business stated in the lending dossier of the borrower. For
loans to beneficiaries who are disadvantaged students and migrant workers
for specific term, the loss scale will be determined based upon the real loss in
comparison to outstanding amount borrowed from VBSP.
Article 7. Approaches to handle NPLs
1. Loan extension
a) In case of loan extension, VBSP allows the borrowers to extend the
loan term stated in the credit contract. During extension period, the borrower
still has to pay interest.
b) Conditions for loan extension
The borrower whose loan is considered for extension has to satisfy
following conditions:
- The borrower suffered from risks due to reasons stated in Item 1 and 2,
Article 5 of this Regulation.
- The loss of capital and asset is below 40%.
c) Extension term: 12 months at maximum for short-term loan and a half
of loan term at maximum for medium-term and long-term loans starting from
the due date.
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2. Loan freeze
a) In case of loan freeze, VBSP does not collect the due debt and the
borrower is free of interest during period of loan freeze.
b) Conditions for loan freeze
The borrower whose loan is considered for freeze has to satisfy the
following conditions:
- The borrower suffered from risks due to reasons stated in Item 1 and 2,
Article 5 of this Regulation.
- The loss of capital and asset is equal to 40% up to 100%.
c) Freeze term
- For the loss of capital and asset from 40% to below 80%: three years at
maximum since the arising date of risks due to objective reasons.
- For the loss of capital and asset from 80% to 100%: five years at
maximum since the arising date of risks due to objective reasons .
- If the borrower still has difficulties and cannot afford to pay back the
debt after the freeze time, the bank will consider a second freeze term, which
is equal to the approved first freeze term at maximum.
3. Write-off (principal and interest)
a) In case of write-off, VBSP shall not collect both outstanding debt and
interest from the borrower.
b) Conditions for write-off
The borrower whose loan is considered for write-off has to satisfy the
following conditions:
- The borrower who suffers from risks due to reasons stated in Item 1 and
2, Article 5 of this Regulation is still unable to pay back the debt after the
freeze period (including the additional loan freeze) and after all possible
collection solutions carried out by the bank.
- The borrower suffered from risks due to reasons stated in Item 3 and 4,
Article 5 of this Regulation and VBSP already carried out all possible
collection solutions.
c) The wrote-off amount (both principal and interest) is equal to the
payable amount after all possible collection solutions carried out by the bank.
Article 8. Legal dossier required for handling NPLs
1. For loan extension and loan freeze (including the additional loan
freeze)
a) The application for handling NPL (form 01/XLN): which states clearly
the reasons of risk, the loss scale of capital and assets, the capacity to pay
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back the debt, the outstanding principal and interest payable to the bank, the
amount applied for extension or freeze.
b) The minute on loss scale of capital and asset of the borrower (form
02/XLN) prepared by VBSP and the borrower and certified by required
competent agencies as regulated in Item 2, Article 6 of this Regulation;
c) The copy of promissory notes: such as the credit contract, the
borrowing book or other valid IOUs stated the outstanding amount (principal,
interest, total amount) on the date of risks, which is sealed and certified as an
official copy by VBSP.
d) If the borrower is an economic organization, the following documents
are required:
- The minute on loss scale of capital and asset under the laws, attached
with financial statements of the last two years;
- The plan to resume the production and business activities of the
organization.
2. Write-off
a) The application for handling NPL (form 01/XLN) which states clearly
the reasons of risks, the loss scale of capital and assets, capacity to pay back
the debt, the outstanding principal and interest payable to the bank, the
amount applied for write-off.
If the borrower is dead, missing or is proclaimed dead or missing, loss the
civil capacity, suffer from mental illness, the inherit (if any) will prepare the
application for handling NPL, otherwise it is not required.
b) The document certifying the asset and capital loss (form 02/XLN)
The document certifying the asset and capital loss prepared by VBSP
branch and borrower, which is certified by required parties under regulations
in item 2, Article 6 of the Regulation. In addition to the assessment of risk
causes and risk level, the following statements must be included in the
document: the bank applied all possible solutions for debt collection from all
available sources of the borrower; the borrower has no assets for debt
payment or has no inherit or whose inherit is unable to pay back the debt.
- If the borrower is dead, missing or is proclaimed dead or missing, loss
the civil capacity, suffer from mental illness, the inherit (if any) will prepare
the application for handling NPL certified by relevant parties regulated in
item 2, Article 6 of this Regulation.
- In case the borrower is still unable to pay back the debt after the loan
extension (including the additional extension) comes due: the document must
include the detailed assessment on the borrowers solvency and statement: the
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loan extension (including the additional extension) comes due and the
borrower is still insolvent although VBSP applied all possible solutions to
collect the debt from his all available sources.
c) Required documents for handling NPL from the borrowers,
disadvantaged students and migrant workers specified as followings:
- In case the borrower losses the civil capacity: the situation must be
certified in the Decision by the Court or by the health agency at district level
or higher level.
- In case the borrower suffers from unceasing illness or mental illness: a
notarized copy of the certification on his health situation of the health agency
at district level or higher level.
- In case the borrower is specially disadvantaged and helpless: the
situation must be certified by the Commune Peoples Committee.
- If the borrower is dead, missing or is proclaimed dead or missing: a
notarized copy of the Death Certificate or a notarized copy of the Decision by
the Court or a certified statement by the Commune Peoples Committee and
the Commune Police on the situation, stating: full name, permanent residence,
date and place of death or missing.
- In case the borrower suffers from accident at work during his
employment abroad: the relevant documents certifying the injury situation or
the medical record certified by the abroad enterprise or the abroad health
agency (attached with a notarized Vietnamese version)
- Other relevant documents: In case the inherit is dead or missing: a
notarized copy of the Death Certificate or of the Decision of the missing case
by the Court or the certification on the Commune Peoples Committee on the
inherit situation whether he died or is missing. In case the inherit is unable to
pay back the debt: the certification of the Commune Peoples Committee.
d) In case the borrower is a legal entity or economic organization who
went bankrupt or was dissolved: a notarized copy of the Decision of
bankruptcy or dissolution by competent government agency or the statement
by the Court and relevant documents involving assets and property liquidation
under the law.
) Copy of promissory notes: credit contract, borrowing book or other
promissory notes stating the outstanding loan (principal, interest, total
outstanding) on the date of risk occurrence (sealed and signed by VBSP
branch).
e) Other relevant documents (if any).
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Article 9. Process for handling NPLs

When a loan is at risk due to objective reasons as regulated in Article 2 of
the Regulation, the borrower is responsible to prepare the Request for
handling NPLs (form 01/XLN) attached with 01 copy of relevant documents
required in point d, item 1, Article 8 and point c, d, e, item 2, Article 8 and
submits to VBSP branch.
VBSP branch is responsible to check the validity and legality of the
documents and works with the borrower and competent individuals and
organizations listed in item 2 of Article 6 to examine and verify the case and
prepare the documents verifying the loss of assets and capital (form
No.02/XLN).
1.VBSP district transaction office
a) Based upon the application for handling NPLs (form No. 02/XLN) and
relevant documents from the borrower, VBSP transaction office is responsible
to formulate a set of legal dossiers (as regulated in Article 8), checks out and
take responsibility on the validity, legality and accuracy of the dossiers and
prepares an incorporated table as follows:
- For loan extension: 02 original copies of the incorporated table of loans
for extension (form No.03/XLN): 01 original copy to VBSP provincial branch
and 01 copy for storage.
- For loan freeze: 02 original copies of the incorporated table of loans for
freeze (form No.04/XLN): 01 copy to VBSP provincial branch and 01 copy for
storage.
- For loan write-off: 02 original copies of the incorporated table of loans
for write-off: 01 copy to VBSP provincial branch and 01 copy for storage.
b) Classify and store documents
- Classify and store documents in terms of NPL treatment (extension or
freeze or write-off), lending programs and name order in the list of borrowers
in form No. 03,04,05/XLN.
- Store documents at VBSP branch: 01 copy of form No.03,04,05/XLN
and all relevant documents of loan extension, loan freeze, loan write-off.
The Director of VBSP district transaction office is responsible to ensure
the validity and legality of all documents for handling NPLs and store
documents under the prevailing regulations.
c) Documents required to send to VBSP provincial branch
- 01 original copy of form No. 03,04,05/XLN.
- Soft copy of form No. 03,04,05/XLN transferred.
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For single case, VBSP district transaction office sends the dossiers (the
syntherized tables form No. 03, 04, 05/XLN) for handling NPLs to VBSP
provincial branch on 31 January and 31 July at the latest. For large-scale case,
VBSP district transaction office sends the dossiers for handling NPLs in phase
to VBSP provincial branch, who will submit to the competent agencies for
consideration and final decision.
2. VBSP provincial branch
Based upon the receipt of the dossiers for handling NPLs from VBSP
district transaction office, VBSP provincial branch is responsible to:
a) Collect all requests for handling NPLs of the branch
- For loan extension: synthesize data and prepare 02 original copies of the
application for loan extension of the branch (form No. 03/XLN): 01 stored at
VBSP provincial branch and 01 submitted to the Headquarters.
- For loan freeze: synthesize data and prepare 02 original copies of the request
for loan freeze of the branch (form No. 04/XLN): 01 stored at VBSP provincial
branch and 01 submitted to the Headquarters.
- For write-off: synthesize data and prepare 02 original copies of the
request for loan write-off of the branch (form No. 05/XLN): 01 stored at VBSP
provincial branch and 01 submitted to the Headquarters.
b) Post-checkout: Check out on site (at VBSP branch) the validity and
legality of the dossiers for handling risk.
c) The dossiers submitted to the Headquarters
- 01 copy of the incorporated table of the whole branch following form
No.03,04,05/XLN.
- Transfer soft copy of the incorporated table following form
No.03,04,05/XLN
- The proposal for handling risk of the branch, stating: risk causes, loss
and damage assessment, amount of outstanding loans at risk for handling,
certification of the accuracy, validity and legality of the dossiers.
Timetable for submitting the dossiers : VBSP provincial branch submits the
dossiers to the Headquarters no later than 28 February and 31 August of the
year or on specific phases for large scale risk caused by natural disasters,
epidemic diseases, flood.
3. The Headquarters
Upon the receipt of the request for handling risk from VBSP provincial
branch, the Headquarters checks and synthesize the information and submits
to the competent authority for consideration. Procedures for specific cases as
follows:
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a) Loan extension: prepare the incorporated table of loans at risk for

extension (form No.06/XLN) to submit to the General Director for
consideration and final decision.
b) Loan freeze and write-off: prepare the incorporated table of loans at
risk for freeze (form No.07/XLN) and for write-off (form No.08/XLN) and
the incorporated table of loans for handling risk caused by objective reasons
(form No.09/XLN) and submit to the Chairman of the Board of Directors for
consideration and final decision.
c) The Headquarters has ad-hoc or routine check of the dossiers for handling
risk at VBSP branches.
If the provision fund of VBSP is not enough to handle risks, VBSP will
report the situation to the Prime Minister for consideration and final decision.
4. Announcement of approval results
Based upon the decision on handling risk of competent authorities, the
Headquarters will send VBSP branch the decision attached with the list of
outstanding loans for extension, freeze, write-off (form No.10, 11, 12/XLN).
05 days after the receipt of the decision, VBSP branch will implement:
a) For loan extension: VBSP branch reclassifies the new loan term in the
Borrowing Book (or credit contract) and fill in the sentence Loan extended
for ..........months according to Decision No.........from date..........
b) For loan freeze: VBSP branch states clearly the term of loan freeze and
fill in the sentence Loan frozen for...........months according to Decision
No..........from date............. and enters the frozen amount in the credit
account from the debit account. If the outstanding loans at the time of
freezing is lower than the outstanding loans approved in the announcement of
loans for freezing, the branch will freeze the real outstanding loans at the time
of freezing.
c) For loan write-off: VBSP branch records the write-off of principal and
interest in the announcement. If the outstanding loans at the time of write-off is
lower than the outstanding loans approved in the announcement of loans for
write-off, the branch will write-off the real outstanding loans at the time of
write-off and prepare the electronic transfer of amount for write-off to the
Headquarters (the Transaction Office) at the same time. The difference between
the outstanding loans for write-off in reality and the outstanding loans approved
in the announcement is stated and explained in form 14/XLN.
Based upon the announcement of outstanding loans for handling, VBSP
branch informs the borrowers clearly the term and amount for handling and

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publicize the announcement at a mobile transaction point on the next fixed

transaction date.
Article 10. Authority and responsibilities for handling loans at risk
1. The Chairperson of the Board of Directors (BOD)
a) Make decision on loan freeze and loan write-off for the borrowers
based upon the proposal from the General Director (if the Provision Fund of
VBSP is enough for handling all cases).
b) Report the cases for loan write-off (principal and interest) to the Ministry
of Finance to submit to the Prime Minister for consideration and final decision if
the Provision Fund of VBSP is not enough for handling all cases, based upon the
proposal from the General Director.
2. The General Director of VBSP
a) Make decision on loan extension for the borrowers.
b) Provide guidance to the whole network to follow regulations on
handling loans at risk regulated by VBSP.
3. The Director of VBSP provincial branch
a) Implement the mechanism for handling loans at risk.
b) Collect and check out the dossiers for loan extension, loan freeze, loan
write-off under the authority of the branch and submit to competent authorities for
consideration and final decision.
4. The Director of VBSP district transaction office
a) Implement the mechanism for handling loans at risk.
b) Collect and check out the dossiers for loan extension, loan freeze, loan
write-off under the authority of the branch and submit to competent authorities for
consideration and final decision.
Collect and check out the legal dossiers for loan extension, loan freeze, loan
write-off and submit to competent authorities for consideration and final decision.
Article 11. Source for handling loans at risk
1. Source for write-off of principal is extracted from the Provision Fund
of VBSP. The establishment and use of the Provision Fund are regulated in
details in the financial management mechanism of VBSP. If the Provision
Fund is not enough for handling all loans at risk, BOD Chairperson will
report the situation to the Ministry of Finance to submit to the Prime Minister
for consideration and final decision.
2. Source for loan extension and loan freeze is extracted from the annual
total operation capital of VBSP.
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- In loan extension term, VBSP will charge interest and collect interest
from the borrower under the credit contract signed and under the prevailing
regulations.
- In loan freeze term, VBSP will not charge and not collect interest from
the borrower. When VBSP calculates and specifies the annual subsidies, the
frozen outstanding loans will be charged 0% interest rate during the freeze
term.
Article 12. Reporting mechanism
1. After handling loans at risk under the decision from the competent
authorities, VBSP district transaction office prepares a report on handling
loans at risk (form No. 13,14/XLN) and send to VBSP provincial branch, who
will synthesize the data and submit to the Headquarters after no later than 30
days since the date of receiving the decision or the announcement.
2. On 30 June and 31 December of the year or on specific phases, the
Headquarters prepares a report on handling loans at risk and submit to the
Ministry of Finance, the Ministry of Labour, Invalids and Social Affairs, the
State Bank of Vietnam under the form regulated in Circular 161/TT-BTC
dated 20 October 2010 of the Ministry of Finance, which provides guidance
to implement the mechanism on handling loans at risk and is issued following
Decision 50/2010/Q-TTg dated 28 July 2010 of the Prime Minister.
Chapter III
IMPLEMENTATION ORGANIZATION
Article 13. The General Director, Directors of Departments and Centers
at the Headquarters, Director of the Transaction Office, Directors of provincial
branches, Directors of district transaction offices and the borrowers are
responsible to effectuate the Decision. Any supplement or amendment to the
Decision will be submitted to the BOD Chairperson for consideration and final
decision ./.
CHAIRPERSON
THE BOARD OF DIRECTORS
(Signed)

Nguyn Vn Giu

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