Consolidated Document 41/VBHN-NHNN: Regulations on Letter of Credit Operations and Related Business Activities

Scope and Applicability

The Circular governs letter of credit (L/C) operations (excluding standby L/Cs) and other L/C-related business activities carried out by commercial banks, cooperative banks, and foreign bank branches (collectively, banks) for customers who are organizations or individuals, both residents and non-residents.

Core Definitions

• A letter of credit is an irrevocable undertaking by the issuing bank to pay the beneficiary upon receipt of a complying document presentation.
• Four core operations: issuance, confirmation, negotiation, and reimbursement of L/Cs.
• Other related business activities include the outright, non-recourse purchase of L/C document sets and other services banks provide beyond core L/C operations.

Operating Principles

• Banks have full autonomy to accept or decline L/C-related credit requests and bear responsibility for their own business outcomes.
• Foreign-currency L/C operations must stay within the foreign-exchange scope stated in each bank's operating license.
• Customers who lack sufficient foreign currency to repay may buy it from the bank handling the L/C or from another credit institution; the servicing bank must sell foreign currency to a customer with a legitimate need.
• Credit agreements for L/C operations must be drafted in Vietnamese (except where there is a foreign element); other L/C documents may use a foreign language by agreement, consistent with international trade practice.
• Parties may apply international L/C trade customs (such as UCP rules) if they specifically cite the version used, and may agree on courts or international commercial arbitration to resolve disputes involving a foreign element.

Credit Conditions and Limits

• The credit amount cannot exceed the value of the underlying sale contract (for issuance) or the L/C value itself (for confirmation, negotiation, and reimbursement).
• Non-resident customers can only obtain L/C issuance or confirmation if they also meet one of these conditions: they are an overseas entity with Vietnamese capital contribution, they fully collateralize 100% of the L/C value with assets held at the same bank, or the beneficiary is a resident.
• The overdue interest rate is capped at 150% of the in-term rate; the rate applied to amounts a bank pays on the customer's behalf cannot exceed that bank's highest overdue lending rate; late-payment interest is capped at 10% per year.
• Banks must publicly post their fee schedules for L/C operations and related activities.

Electronic L/C Operations

Banks and customers may choose to conduct L/C operations electronically, subject to anti-money-laundering, e-transaction, and personal-data-protection laws. Minimum requirements include: meeting security and confidentiality standards; applying electronic transaction authentication; fully retaining customer-identification records; periodically testing system safety (Level 3 information-security standard or higher); and clearly assigning responsibility to specific individuals or units operating the system.

Rights and Obligations

Banks may accept or reject requests, demand information for due diligence, require repayment of principal, interest, and fees, and sue for breach of commitments. Customers may reject requests inconsistent with the agreed terms, sue for breach, and must provide honest, accurate information and repay principal, interest, and fees on time.

What Changed in This Consolidation

Circular 85/2025/TT-NHNN (effective December 31, 2025) revised the legal basis and several procedural provisions to reflect the State Bank's internal restructuring - most notably, changing which State Bank unit receives banks' internal L/C regulations (now the Credit Institution Supervision Department and regional State Bank branches, replacing the pre-restructuring authority). This is an administrative routing change, not a substantive change to banks' or customers' rights and obligations in L/C operations.

Effective Date and Transition

The original Circular 21/2024/TT-NHNN took effect July 1, 2024. Contracts and L/C agreements signed before that date remain valid until their term ends; amendments, extensions, or supplements are only permitted if consistent with the new Circular. Banks already licensed for L/C operations before the effective date may continue without amending their license; banks holding only payment-service licenses (domestic or international) may continue L/C operations until June 30, 2026.