Leasing and finance company borrowers get six-month extension to payment holiday

• New instructions carry options for restructuring facilities for long period  
• CB instructs NBFIs to suspend all types of recovery actions through March 2022

 The payment relief afforded to borrowers of finance and leasing companies affected by pandemic-induced economic hardships were granted with a further six month extension through March 2022, with the options for facility restructuring for longer period and early settlement with no additional fees if one chooses to do so. 

The latest round of relief on non-bank finance institutions (NBFIs) sector borrowers came last week as their previous round of relief came to an end on September 30 and a large swath of businesses and people continue 

to face economic difficulties as a result of the months long restrictions and sporadic lockdowns which prevailed since mid-April this year. 

The banking sector borrowers received a four-month extension to their payment holidays, effective through December this year,  most likely its last round of moratoria as the Central Bank indicated their intensions to unwind them starting next year, replacing them with long term business support plans for those who will continue to face challenges. 

“NBFIs shall defer recovery of capital, interest, or both up to 31 March 2022”, the circular issued on October 6 said. 

While the borrowers are required to restart servicing their original loan installment from April 1, 2022, the commencement of the recovery of the new term loan created out of the capital and interest fallen due during all rounds of moratoria, including of the latest round would begin from July 1, 2022 with a minimum repayment period of 12 months. 

“NBFIs may charge an interest rate on the new loan, not exceeding 11.5 percent per annum”, the circular added.
In an alternative to opting to the moratoria, the NBFIs are also offered the option to restructure the facilities of affected borrowers - both performing and non-performing - for a longer period, “considering the repayment capacity of the borrower and an acceptable revival plan agreed by both parties”. 

The interest rate chargeable for the restructured loan is set at 3 percent less the original contractual interest rate, but subject to a floor of 11.5 percent and a ceiling of 15 percent per annum. 

The borrowers who opt for this option will also receive a 3-month grace period for the capital portion of the installment. 

“NBFIs shall waive-off penal interest accrued or charged during the period 1 April 2020 to 30 September 2021”, the Central Bank said. 

And the borrowers who want to opt for these concessions under the latest circular are requested to make written request including via electronic means on or before November 1, 2022. 

The Central Bank also instructed he NBFIs to suspend all types of recovery actions through March 2022, “

provided that such facilities have been classified as non-performing on or after 01 April 2020 and the respective borrowers are not in a position to continue/immediately start repayment of loans due to the disruption to their normal income earning activities”.