Fresh moratorium on passenger transportation sector leases

• Both public and private passenger transport services and tourism sector stand eligible  
• Will be effective for 6 months from April 1; should be applied on or before April 19

In what could be a new round of concessions for those who became a direct casualty of the pandemic effects, the Central Bank issued fresh instructions to provide payment holidays on leases on vehicles engaged in the passenger transport sector. 

This comes a week after Central Bank officials hinted at the possibility of extending relief to those who continue to face challenges due to the prolonged business disruptions caused by the pandemic. 

Consequent, the Central Bank requested licensed banks to hold off on the lease instalments, including both capital and interest component for a period of six months effective from April 1, 2021. 

“Licensed banks shall defer the lease instalments for a period not exceeding 6 months commencing from 1 April 2021 or a shorter period as applicable, considering the financial difficulties faced by the eligible borrowers”, a circular issued to licensed banks stated last week. 

The Central Bank was in fact considering whether they could extend the concessions for the borrowers in sectors, which are still subjected to the vagaries of the pandemic but ruled out blanket relief as banks had already extended relief twice since the start of the pandemic, while a majority of the sectors are making a rebound. 

The eligible borrowers under this new scheme are the businesses and the individuals engaged in providing public passenger transportation, private passenger transportation such as school transport service, office transport service, taxis including three-wheelers, etc. and those who are providing passenger transportation services to the tourism sector. 

However, borrowers must request for the relief on or before April 19, 2021 for the deferment of the lease instalments, in writing or through electronic means. 

“Licensed banks shall expeditiously communicate the concessions, deadline and application format for submission to all eligible borrowers via printed and/or electronic means including e-mail and SMS,” the circular stated. 

Further instructions were issued to licensed banks to extend the lease tenor by the respective period of deferment and charge no more than one percent above the one year Treasury bill rate at the latest auction available as at April 1, 2021 for the instalments falling due during the deferred period. 

However, such interest shall be recoverable only from April 2023 along with existing lease instalments falling due during this period. 

“In 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 tenor of the lease facility,” the circular instructed.