COVID relief gets extended to passenger transport sector

Relief afforded to pandemic affected borrowers in the passenger transport sector affiliated to tourism in particular and others in general have been granted with an extension in line with the extensions granted separately for each sector effective from the dates they lapsed.

Considering the lingering pandemic effects on the transport sector, the Central Bank in March extended a moratorium on leases of the vehicles engaged in the passenger transport sector, including tourism as transport and tourism were one of the hardest hit sectors since the onset of the pandemic last year.  According to a fresh circular issued on Tuesday, the Central Bank directed licensed banks to extend such payment holidays applicable on both capital and interest components of such leases until the payment holidays on each sector last as per the dates stipulated in the fresh circulars issued in September announcing the extensions separately. 

As a result, licensed banks were asked to “accommodate the lease facilities obtained by COVID -19 affected businesses and individuals providing passenger transportation services to tourism sector”, through June 30, 2022 effective from October 1, 2021.

Individuals and businesses engaged in passenger transport services in sectors other than tourism  were granted a four-month moratorium on their leases through December this year, in line with the blanket moratoriums granted for the rest of the sectors by the Central Bank earlier in September considering the impact on their incomes from the prolonged lockdowns.  Central Bank Governor Ajith Nivard Cabraal  unveiling the 6-month road map recently indicated that there was no intension to continue with the moratoria longer than what was already granted in the fourth round since the pandemic struck the country in March last year as it wasn’t sustainable for the banking sector to carry payment holidays for a prolonged period. Instead, he said the Central Bank would put in place a long-term plan to support the businesses affected by pandemic related lockdowns. 

Despite the prevailing virus, countries are largely pivoting from completely suppressing the virus to live with it as economies both big and small cannot withstand unending closures and re-openings. 

To alleviate the pressure on banks and finance companies from the interest income that they accrued on account of loans and leases under the moratoria, the Central Bank would provide liquidity up to Rs.15 billion.

Further, the Central Bank would also put in place an emergency lending facility framework to further ease the pressure on borrowers. 

While there is a growing chorus from a section economists for letting the interest rates to rise, the Central Bank has an important interest towards supporting the tens of thousands of businesses and millions of individuals who have for 18 months struggled to restore their incomes, and the faster increase in rates could undermine their recovery.

Further, the Central Bank has the difficult task of restoring macro-economic stability while supporting the recovery of the economy beset repeatedly by the pandemic, for which maintaining benign levels of interest rates and making available the required liquidity for the State as well as the private sector remain crucial, something which is oblivious for the so called experts, the pure academics and the sheer critics.