State Bank extends availability of loan deferment facility

KARACHI: The State Bank of Pakistan (SBP) has extended the deadline for consumers, small and medium businesses to apply for one-year moratorium on loan repayment till September 30 after recording freeze on nearly Rs600 billion of principal amounts.

“Considering the fact that COVID-19 pandemic is continuing to stress the cash flow of small and medium sized businesses and households, SBP has decided to extend the deferment of principal amount facility up till 30th September 2020,” the SBP said in a statement.

The central bank, with the collaboration of Pakistan Banks Association, announced a comprehensive set of measures to help businesses and households to manage their finances in late March amid growing concerns about the potential economic impact of the COVID–19 pandemic.

A key measure was the deferment of principal amount of loans and advances by banks and development finance institutions. Under the facility, businesses and households could request for the deferment of their loans and advances for a period of one year till June 30, albeit continuing to service the mark-up amount.

The measure also ensured that the deferment of principal would not affect borrower’s credit history and such facilities would not be reported as restructured/rescheduled in the credit bureau’s data.

“This measure proved extremely helpful for borrowers and is evident from the fact that up till 3rd July 2020, banks deferred Rs593 billion of principal amount of loans of over 359,000 borrowers,” said the SBP. “A very large number of borrowers – 95 percent of total beneficiaries of this scheme, as of July 3, 2020 – have been small borrowers including SMEs (small and medium enterprises), consumer finance, and microfinance.”

The facility is available for small and medium enterprise, consumer, housing, agriculture and micro financing. The facility is not being extended to corporates and commercial borrowers since a significant amount of their loans and advances has already been deferred, said the SBP. It is expected that more businesses and households, who were not able to avail the facility, will benefit from this extension.

The facility is part of other financial assistances announced by the central bank to lend helping hands to banking customers in the challenging times. The SBP announced three measures to address the economic and health challenges posed by the spread of COVID-19: interest rate cut, refinancing scheme and temporary economic refinance facility.

The central bank earmarked more than Rs100 billion in concessionary loans for manufacturing and health sectors to help them combat coronavirus challenges.