THE grace period for loan payments to financial institutions is further extended as some areas of the country continue to be under modified enhanced community quarantine (MECQ), the Bangko Sentral ng Pilipinas (BSP) said.
In Memorandum No. M-2020-042 signed by BSP Governor Benjamin E. Diokno on May 18 said the Bayanihan to Heal as One Act states the loan relief is still applicable if there are areas in the country that remain under enhanced community quarantine (ECQ) or MECQ.
“The mandatory grace period shall still apply to all loans extended by all covered financial institutions irrespective of their place of operation,” the memorandum said.
“The application of the mandatory grace period shall cease once the ECQ and MECQ are lifted in the entire country,” it added.
The implementing rules and regulations (IRR) of Republic Act No. 11469 or the Bayanihan to Heal as One Act directs banks and other quasi-banks such as loan associations, credit card issuers and pawnshops to provide a 30-day grace period for clients amid the impact of the coronavirus disease 2019 (COVID-19).
Financial institutions covered by the IRR are also ordered to not impose interest, fees, and charges on future payments and amortizations that have been accrued during the 30-day grace period.
Lenders have begun booking higher loan provisions in the first quarter, factoring in the possible impact of COVID-19 on sectors. This has caused lower profits for some banks in the period.
The extension is a welcome development for struggling businesses with operations that were shuttered because of the lockdown, according to Sergio R. Ortiz-Luis, Jr., president of the Employers Confederation of the Philippines.
“Definitely, anything that gives leeway to the businessmen will help,” he said in a phone call.
Mr. Ortiz-Luis said this would particularly bring relief to small businesses.
“Marami diyan hindi naman na magbubukas eh. Kulang sila ng working capital…Kailangan talaga matulungan sila sa extension (Many of these small businesses will not be able to restart operations because they lack working capital. They really need help in terms of loan payment extension),” he said.
The Philippine Chamber of Commerce and Industry (PCCI) has called for credit lenders to give at least one year extension for loans maturing between Mar. 16 to Dec. 31 given the “deteriorating cash positions” that small businesses face.
Asked to comment on PCCI’s position, Mr. Ortiz-Luiz said: “Definitely may resistance ang bangko doon. But at the end of the day, kung makikita nila na hindi naman kaya ng mga kumpanya, baka naman pumayag (There will definitely be resistance from banks for a year-long extension. But if these banks see that businesses have no ability to pay these loans at this time, maybe they will agree to it).” — L.W.T. Noble