BSP orders banks to allow 60-day grace period on loan payments

The Bangko Sentral ng Pilipinas (BSP) ordered Friday all banks and financial institutions to impose a 60-day grace period on loan payments as mandated by the Bayanihan to Recover as One Act or Bayanihan 2.

BSP Governor Benjamin Diokno signed a memorandum on September 18 requiring all central bank-supervised financial institutions to impose the Section 4(uu) of Republic Act No. 11494 or the Bayanihan 2, which was signed to a law on September 15.

The said measure requires all covered financial institutions to impose a mandatory one-time 60-day grace period to all loans that are existing, current, and outstanding falling due, or any part thereof, on or before December 31, 2020.

The mandatory one-time 60-day grace period would cover each loan of individuals and entities with multiple loans.

“BSFIs (BSP-Supervised Financial Institutions) shall not charge or apply interest on interest, penalties, fees, or other charges during the mandatory one-time 60-day grace period to future payments/amortizations of the borrowers,” Diokno said.

“They are likewise prohibited from requiring their clients to waive the application of the provisions of the ‘Bayanihan to Recover as One Act,’” he said.

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60-day grace period on loan payments

Diokno said no waiver previously executed by borrowers covering payments falling due until December 31, 2020, shall be valid.

“The accrued interest for the one-time 60-day grace period may be paid by the borrower on a staggered basis until December 31, 2020. Nonetheless, this shall not preclude the borrower from paying the accrued interest infill on the new due date,” Diokno said.

The BSP chief also said that parties may agree to a grace period longer than 60 days and/or payment of accrued interest on a staggered basis beyond December 31, 2020.

The Bayanihan 2 also allows the BSP to lend more to the national to boost its response.

BSP can give additional direct provisional advances to the government “to finance expenditures authorized by law that will address and respond to the situation.” The loan, however, should not exceed 10% of the ’s average income for fiscal years 2017 to 2019.

The Bayanihan 2 authorized the BSP to lend up to P850 billion from its previous limit of P540 billion.