Late payment charges on Govt loans

Borrowers of money sourced from the government’s foreign debt will be charged a late fee equal to 150 percent of the interest due on their loans from Monday, August 1.

The present penalty is 130 percent of the prevailing interest rate.

The decision to tighten the criteria for loans to financial institutions and provincial People’s Committees is embodied in Decree No78/2010/ND-CP which was signed on July 14.

The purpose of the decree is to promote effective spending.

“I think the higher late-payment-fee is to remind borrowers of the need to improve the profitability of each borrowed penny,” Central Institute for Economic Management deputy director Vo Tri Thanh said.

A member of another Hanoi-based economic think-tank, who asked to remain anonymous, said the decision seemed essential after spending violations such as those by the Vinashin Business Group.

The new decree regulates three types of fees which, unlike previously, are based on the type of borrowings rather than the value of the loans.

Borrowers from Overseas Development Assistance loans will have to pay a fee equal to 0.2 percent of the debt balance; the fee for commercial and preferred borrowers will total 0.25 percent of the debt balance.

The fee will not apply to provincial people’s committees.

Foreign lending parties will have responsibility for the collection of the second type of fee-the management; commitment; capital withdrawal; insurance and any other fees stipulated in the foreign loan.

The third type of fee-borrower payment of fees to intermediary banks will remain subject to the latter’s regulations.

The decree sets the interest rates for commercial and preferential borrowing at the interest paid for the foreign loans.

The interest for borrowings from ODA moneys in foreign currencies will be calculated for each type of currency at two-thirds of the prevailing commercial rate.

If this is less than the interest for the foreign loan, the rate will be equal to the interest rate of the ODA loan.

The interest in dong will equal the rate for foreign-currency loans plus fees for exchange-rate risk.

The State Bank of Vietnam and the finance ministry will estimate the risk for the US dollar, the euro and Japanese yen.

Provincial People’s Committees have to pay interest at the rate for foreign borrowings.

The prime minister will decide who is eligible to borrow at a preferred interest rate equal to 30 percent of the prevailing rate.

Provincial people’s committees, credit and financial institutions and some other borrowers will be able to raise loans without security if the prime minister agrees.

Tags: Vietnam finance, Vietnam financial

Posted by VBN on Jul 23 2010. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry