• Applies to both capital and interest components on case-by-case basis 
• Borrowers who seek extended relief are required to make formal requests on or before Sept.21
• Banks asked to prioritise requests made by micro, small and medium sized enterprises
• Banks asked not to charge any penal interest rate during the payment holiday  period

Borrowers who continue to be battered by the pandemic-induced restrictions on their income generating activities are given further four months of loan relief and a host of other concessions, effective from September 01, 2021.  The fresh round of payment holidays for affected borrowers came as the most recent relief scheme—third since the start of the pandemic.  

The previous two rounds of moratorium were operational from April 2020 through September 30 and October 1, 2020 through March 2021. 

According to the new scheme, which came into effect on September 01, 2021, the pandemic-affected borrowers who make formal requests for such relief get time till December 31, 2021 to hold on their loan installments consisting of both capital and interest on a case-by-case basis, “considering the financial difficulties faced by such borrowers, including loss of job, loss or reduction of income/salaries or sales, reduction or impairment of business operations or the closure of business etc.”, a circular issued by the Central Bank to licensed commercial and specialized banks read. 

Borrowers who seek extended relief are required to make formal requests on or before September 21 in writing or through electronic means, but any delays would be tolerated as long as the reasons for such delays are acceptable to the bank. 

Any rejection of the application for relief must be informed in writing within 14 days by the bank with reasons for rejecting, but the borrower has the option to appeal against such rejection with the Director, Financial Consumer Relations Department at the Central Bank, requesting a review. 

In entertaining requests for relief under the scheme, the Central Bank asked banks to prioritise the requests made by micro, small and medium sized enterprises, as they are the hardest-hit segment from the pandemic.

Stipulating the mechanism as to the recovery of the installments which fell due during the moratorium, the Central Bank asked banks to amalgamate the amounts due from the previous rounds of moratorium with the current round of moratorium, including capital and interest into a new loan and agree on a repayment date commencing from July 1, 2022 up to 6 months. 

Such a loan carries the interest rate of 1 percent above the latest one-year treasury bill rate as at August 31, which is 5.93 percent, and together makes to 6.93 percent, at which the interest calculation commences from September 1, 2021 for the agreed period of repayment. Meanwhile, in respect to loans denominated in foreign currencies, licensed banks may charge a concessionary rate of interest, the circular read. 

For borrowers who seek repayment periods beyond six months to settle their loans should agree for a concessionary rate beyond the 6-month period with their respective banks.  Alternatively, banks may also opt to restructure facilities on a case-by-case basis considering the repayment capacity of the borrower and an availability of an acceptable revival plan. 

However, the regular servicing of facility will commence on January 1, 2022 with the end of the current moratorium scheme on December 31, 2021.  In respect of relief for non-performing loans as at September 1, banks were asked to reschedule such facilities on a case-by-case basis over a longer period of time, considering the repayment capacity and an acceptable revival plan. 

Banks were also asked to suspend all types of recovery actions until December 31, 2021 against facilities that have been classified as non-performing on or after April 1, 2020. 

“In instances where there are ongoing litigations in Courts relating to recovery, borrowers shall enter into agreement in Courts to obtain this concession,” the Central Bank added.  Besides the above relief, the Central Bank also asked banks not to charge any penal interest rates during the period of the payment holiday and waive off any accrued or charged penal charges during April 1 2020 to September 1, 2021 in respect of non-performing facilities, provided such facilities are considered for restructuring under this scheme.  Further, banks were also asked not to levy excessive fees or charges in relation to granting the concessions under this scheme and should inform in writing to the borrower of such fees if there are any. 

Also, the validity period of cheques valued less than Rs.500, 000 would be extended until October 31, 2021 under this scheme, while charges for cheque returns and stop payments in relation to all cheque payments would be discontinued until September 30, 2021. 

Meanwhile, banks were also asked to discontinue the late payment fees on credit cards and other credit facilities up to October 31, 2021, “ for those demonstrably affected”. 

For those borrowers who would want to settle their loan facilities during the moratorium period instead of opting for the concessions under the scheme should be encouraged to do so by providing interest rebates and without slapping early settlement fees and, other fees and charges including recovery of future interest of lease facilities, if any. 

Further, banks should also accommodate requests by borrowers to delay the due dates of their installments dates up to 15 working days without deferring or restructuring such facilities and without additional interest or charges considering the ongoing quarantine lockdown.