On 29 July 2022, the Ministry of Planning and Investment (“MPI”) issued Official Letter No. 5251/BKHĐT-PTDN (“OL 5251”) answering some questions of the State Bank of Vietnam (“SBV”) on preferential interest from the State Budget to enterprises, co-operatives, and business households indicated in Decree 31/2021/ND-CP (“Decree 31”).

Below is a summary of the MPI’s answers to the SBV’s questions.

Q: Whether an enterprise is eligible for preferential interest if the registration certificate does not prescribe the business lines but the customer wishes to use the funds for business lines which are listed in Decision No. 27/2018/QĐ-TTg dated 6 July 2018 (“Decision 27”) and Decree 31 or, if the registration certificate prescribes business lines which are listed in Decision 27 and Decree 31, but the customer wishes to use the funds for business lines which are not listed in Decree 31.

A:  According to Article 7 of Decree No.01/2021/NĐ-CP dated 4 November 2021 guiding the business registration (“Decree 01”), even though the registration certificate does not prescribe the business lines, the enterprise is required to select the fourth-level economic sector in the Vietnam Industry Classification System to fulfil the application for the establishment of enterprise, or changing the enterprise’s registered information.   The customer must (i) register the business line listed in Article 2.2.(a) of Decree 31; (ii) the purpose of lending is for business lines listed in Article 2.2.(a) of Decree 31 in order to be eligible for preferential interest.

Q:  Whether a household business is eligible for preferential interest if it is not required to register in accordance with Article 79.2 of Decree 01 and the purpose of lending is listed in Article 2.2 (a) of Decree 31?

A: According to Articles 79.2 and 89.1 of Decree 01, the business lines of a household business are recorded for registered household businesses. According to Article 2.2(a) of Decree 31, the customer must (i) register the business line listed in Article 2.2.a of Decree 31; (ii) the purpose of lending is for business lines as listed in Article 2.2(a) of Decree 31. As a result, household business which is not required to register in accordance with Article 79.2 of Decree 01 is not eligible for preferential interest.

Q: Whether the customer is eligible for preferential interest if it’s business is related to construction and the purpose of lending is for business lines listed in Article 2.2.(a) (excluding the L business)?

A:  In case the customer operates a business in the construction industry and the purpose of lending is for business lines listed in Article 2.2(a) of Decree 31, according to Decision 27, the construction industry is classified as F which is not listed in Article 2.2.(a) of Decree 31. Therefore, the customer does not satisfy the first condition for being eligible for preferential interest.

Q:  Whether the customer would like a long-term loan and medium-term loan when the purpose of lending is investment or procurement of fixed assets that are eligible for preferential interest; and

Q: Whether the purpose of the loan is purchase/lease-purchase/lease real estate for headquarters, production for business lines listed in article 2.2.a of Decree 31 is eligible for preferential interest; and

Q: Whether a customer with multiple business lines wherein some of which are listed in Article 2.2.(a) of Decree 31 and the purpose of the loan is for operating expenses (wages, electricity and water costs, stationery, management expenses)?

A: During the appraisal process of loan applications, commercial banks need to ensure that the subjects fully meet the conditions for preferential interest including: (i) registering the business line listed in Article 2.2.(a) of Decree 31; (ii) the purpose of lending is for business lines listed in Article 2.2.(a) of Decree 31. Activities such as investment or procurement of fixed assets; purchase/lease-purchase/lease real estate for headquarters, production; payment of operating expenses of the enterprise are items of long-term investment or short-term operating expenses in the business plan of the customer when borrowing capital. Therefore, it is recommended that commercial banks strictly manage the use of loans in accordance with the loan purposes and business plans that have been appraised and approved by the commercial banks in order to accurately grant preferential interest.