Saturday Dec 14, 2024
Saturday Dec 14, 2024
Wednesday, 26 May 2021 00:00 - - {{hitsCtrl.values.hits}}
The Central Bank has announced extension of debt relief for COVID-impacted businesses and individuals in response to requests following the rapid spread of the third wave of the pandemic.
A directive to this effect was issued by the Central Bank yesterday to all licenced commercial and specialised banks.
Banks have been told to defer or restructure existing credit facilities in the performing category (as at 15 May) to 31 August. This includes capital, interest, or both, of existing facilities of those who are affected by the third wave of COVID-19, on a case by case basis, considering the financial difficulties faced by borrowers, such as loss of jobs, loss or reduction of income/salaries, closure of business etc.
The deferment of capital, interest, or both, should be granted for one or more of the existing facilities granted in rupees or foreign currency, considering the financial difficulties and repayment capacity of borrowers.
In the case of any rupee facilities considered for deferment, banks may charge an interest rate not exceeding the 364-day Treasury bills auction rate as at 19 May plus 1% per annum (i.e. 5.18% + 1% = 6.18% per annum), for a deferred period and only on the deferred amount. In the case of foreign currency loans, banks may charge a concessionary interest rate considering the prevailing low interest rates.
Alternatively banks may restructure the existing credit facilities over a longer period, considering the repayment capacity of the borrower and an acceptable revival plan. In this case, banks and the borrower must agree on an interest rate considering the prevailing low interest rate regime.
Banks have been told to extend due dates of revolving credit facilities including but not limited to facilities such as working capital, pawning, temporary overdrafts, short term trade finance facilities etc., during the period up to 31 August, provided such due dates fall during 15 May to 31 August. Banks may charge interest for the deferred period and only on the amount deferred.
The Central Bank has stipulated that penal interest should not be accrued or charged during the concessionary period of 15 May to 31 August.
Banks have been requested to accommodate any request from affected borrowers to delay the due dates of loans repayment by a few days (maximum 10 working days) due to the ongoing travel restrictions, without deferring or restructuring such facilities. Here too banks cannot charge any additional interest or other charges for such delays.
Borrowers who are currently enjoying deferment of lease repayments or moratorium under previous measures are not eligible for the latest concessions announced yesterday.
With regard to non-performing category, as at 15 May, banks may rescheduled the existing non-performing facilities over a longer period, considering the repayment capacity of the borrower and an acceptable revival plan. In this case, the bank and the borrower should agree on the terms and conditions including the interest rate.
Banks should waive-off penal interest accrued or charged during the period 1 April 2020 to 15 May 2021 provided such facilities are considered for rescheduling under the latest scheme. Banks also have been told to suspend all types of recovery actions until 31 August against credit facilities that have been classified as non-performing on or after 1 April 2020.
Banks should not levy excessive fees or charges in relation to granting of concessions and extend the validity period of cheques valued less than Rs. 500,000 until 30 June.
Banks have also been told to discontinue charging for cheque returns and stop payments in relation to all cheque payments until 30 June.
Banks have been told to discontinue late payment fees on credit cards and other credit facilities during the period up to 30 June for those who are demonstrably affected. Banks have been told not to charge any early settlement fee in the case where a borrower has expressed his willingness to settle existing credit facilities on or before 31 August instead of opting for the deferment or restructuring of the existing facilities.
Furthermore banks cannot decline loan applications from eligible borrowers under this scheme solely based on an adverse CRIB record, and, in consultation with CRIB, banks should develop a reporting modality to report deferment/restructuring granted under this scheme, so that participation in the scheme will not have an impact on the credit score of borrowers in the future or be negatively reflected in future CRIB reports.
Eligible borrowers must request for new concessions on or before 21 June in writing or through electronic means. Banks have been told to expeditiously communicate the concessions, deadline and application format for submission to all eligible borrowers via printed and/or electronic means including email and SMS.
Banks should accept any request submitted after 21 June if the reasons for the delay in making such request is acceptable.
All eligible borrowers who have the capacity to service the loan repayment is expected to service such loan repayments instead of requesting for deferment of restructuring of credit facilities.
Banks must ensure that the borrowers are made aware of the structure of the deferment or restructuring of credit facilities prior to approval. In the case of declined requests, banks should clearly mention the reasons.
Banks also have been told they can offer additional concessions to businesses and individuals affected due to the third wave of COVID-19 on their request, in a way that the overall benefits to the borrower are not less than the benefits offered under the latest initiative.
