Fresh support to COVID-hit passenger transportation sector

• CB extends moratorium on lease facilities for six months from 1 April
• Directs banks, finance and leasing companies to offer additional support on request

The Government has extended fresh support to businesses and individuals engaged in passenger transportation sector given the continued challenges faced owing to the COVID-19 pandemic.

The Central Bank last week announced the extension of moratorium on lease instalments (capital and interest) for six months or shorter period as applicable starting from 1 April, considering the financial difficulties faced by the eligible borrowers in the passenger transport sector. The directive was issued to both licenced commercial banks (LCBs) and Non-Bank Financial Institutions (NBFIs) – finance and leasing companies. 

Businesses and individuals engaged in providing public passenger transportation, private passenger transportation such as school transport service, office transport service, taxis including three wheelers, etc. and providing passenger transportation services to tourism sector are eligible to benefit from the latest support scheme. Performing lease facilities including lease facilities under moratorium as at 31 March obtained by eligible borrowers will qualify for this extension.

Eligible borrowers can request on or before 19 April for deferring the lease instalments in writing or through electronic means. LCBs and NBFIs should expeditiously communicate the concessions, deadline and application format for submission to all eligible borrowers via printed and or electronic means including email and SMS. LCBs and NBFIs must accept any request submitted after 19 April, if the reasons for delay in making such request is acceptable.

LCBs and NBFIs have been asked to waive off the penal interest accrued and unpaid as at 1 April, if any. Penal interest will not be accrued and charged during the period of deferment.

Central Bank has instructed LCBs and NBFIs should extend the existing tenure of lease facilities eligible for deferment by the respective period of deferment; can charge an interest rate for the deferred period only on the lease instalments falling due during the deferred period, not exceeding the latest auction rate for 364-days Treasury Bills, available as at 1 April, plus 1% per annum.

Such interest can be recovered from April 2023 along with the existing lease instalment falling due during this period. In the case where, the remaining tenure of the lease facility ends before April 2023, financial institutions may commence recovery of such interest at the completion of the remaining tenure of the lease facility. Once the remaining tenure of the existing lease facility is over, borrowers can commence repayment of the deferred instalments.

The Central Bank circulate states: Considering that the use of public and private transportation is gradually returning to normalcy due to reopening of schools (monthly payments being collected uninterruptedly by many transport providers), offices, airport, etc., potential impact of the extended debt moratoriums on the LCBs and NBFIs, and the ongoing vaccination program, LCBs and NBFIs can commence recovery of instalments falling due in relation to the moratorium granted during 1 April 2019 to 31 March 2020, 1 April 2020 to 30 September 2020 and 1 October 2020 to 31 March 2021, as applicable, during the deferred period of the existing lease facility.

Once the deferred period of the existing lease facility is over, the repayment of the instalments due on the moratoriums can be deferred until the remaining tenure including the deferred period of the existing lease facility is over.

For such deferred period of the instalments due on the moratoriums, interest shall accrue at a rate not exceeding the latest auction rate for 364-days Treasury Bills, available as at 1 April, plus 1% per annum. The interest shall be recovered immediately after completing the payment of interest along with the instalments on the existing lease facility and deferred instalments relating to moratoriums, as applicable.

Once the remaining tenure including the deferred period of the existing lease facility is over, borrowers can commence repayment of the deferred instalments relating to the moratoriums.

If the borrower submits a written request to settle the lease instalments falling due during the deferred period including the dues of moratoriums and interest for the deferred period, early, LCBs and NBFIs can facilitate such requests. In such case, LCBs and NBFIs and the borrower shall agree on the structure, interest rate and the tenure. The interest rate shall be in line with the current market rate.

LCBs and NBFIs may offer any additional options to borrowers, on the request of the borrower, in a way that the overall benefits to borrowers are not less than the benefits offered under this circular. In such case, LCBs and NBFIs shall clearly explain the interest computation under all options including the structure proposed in the latest Circular to the borrower, prior to approving such concession.

LCBs and NBFIs shall not levy excessive fees or charges in relation to granting of the concessions.