In the wake of Covid-19, the State Bank of Pakistan (SBP) extended the deferment of the principal amount of loans facility for the next three months to provide some more relief for the banks’ borrowers.
Due to the current pandemic situation in the country, the SBP has agreed to extend the Deferment of Principal Amount facility by September 30th, 2020.
Amid rising concerns about the possible economic effects of the Covid-19 pandemic on 26 March 2020, State Bank of Pakistan (SBP) announced a comprehensive collection of steps in collaboration with the Pakistan Banks Association (PBA) to help companies and households handle their finances. One key measure among these was the deferment by banks and DFIs of the principal amount of loans and advances.
Under the relief plan, banks and DFIs were requested to postpone principal payments on loans and advances by one year in order to cope with Covid-19’s effect. To make use of this relaxation, borrowers were required to submit a written request to the banks before June 30th 2020.
In view of the prevalent pandemic and the representation of stakeholders, it was decided to extend by ninety days the last date for the submission of requests by borrowers for deferral of principal. The borrowers, who have not taken advantage of the deferment of the principal, can now submit their application to the banks / DFIs by 30 September 2020, the State Bank said in a circular on Tuesday.
According to the SBP, businesses and households may request that their loans and advances be postponed for a period of one year under this provision, while the mark-up value continues to be serviced. The initiative has ensured that the principal deferment would not impact the credit history of the borrower and that these facilities will not be reported as restructured / rescheduled in the data of the credit office.
This measure has proven extremely beneficial to borrowers and is evident from the fact that banks have deferred Rs 593 billion of the principal amount of loans of more than 359,000 borrowers until 3 July 2020. Around 95 percent of the total beneficiaries of this system were a very large number of lenders, as of July 3, 2020 they were small borrowers like SMEs, consumer finance, and microfinance.