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Banks with bad debt ratio of above 3pct forbidden to open branch

As per the Circular No 21/2013/TT-NHNN issued on September 10 by the State Bank of Vietnam (SBV), which stipulated the operation network of commercial banks, commercial banks with the bad debt ratio of above 3 percent are forbidden to open branch.

To be allowed to set up branches in the country, commercial banks must meet some conditions such as the operation time of from 12 months onwards and profitable business operations according to the audited fiscal statement. Especially, banks have to fully carry out the regulations on debt classification and spending on risk provisions in accordance with the regulations and the bad debt ratio in comparison with the total outstanding loans does not exceed 3 percent.

According to this circular, commercial banks are allowed to set up maximum 10 branches in each inner city area in Hanoi or HCM City. Commercial banks with the operation time of less than 12 months are just allowed to establish less than three branches and these branches are not allowed to locate in the same province or city. Commercial banks with the operation time of above 12 months are allowed to establish less than five branches in one fiscal year.

For transaction offices, commercial banks are just allowed to set up transaction offices when their management branches have the bad debt ratio of less than 3 percent of the total loans. Transaction offices are not allowed to grant credit exceeding two billion dong per customer except loans being guaranteed by the whole cash, saving card and valuable papers issued by that bank.

The Circular takes effect from October 23, 2013.

 
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