Banks urged to extend loan repayment deadlines

The Bank of the Lao PDR is asking commercial banks and financial institutions to ease the burden on business owners and workers suffering the effects of the Covid-19 outbreak by extending the deadline for loan repayments.
Speaking at a media conference on May 17, Deputy Governor of the Bank of the Lao PDR, Mr Phouthaxay Sivilay, said commercial banks and financial institutions under the administration of the central bank would be required to offer relief to their debtors.

“Leasing businesses and pawn shops are required to consider suspending or extending the deadline before which they would take possession of or sell assets deposited by customers as security against the money they borrowed, for at least two rounds of payments,” he said.
“They should also appropriately reduce or waive the administrative fees and fines they charge customers who are suffering economic hardship during the Covid-19 pandemic.” 
Mr Phouthaxay made the call on behalf of the Bank of the Lao PDR, which is supporting the government’s mission to minimise the impact of the pandemic on business owners and workers, especially those who have taken out a bank loan and are obliged to repay the money while they are jobless or have a greatly reduced income.
Banks and other financial bodies that comply with the demands and policies of the central bank will receive incentives, including permission to lower their currency reserve requirement from 5 percent to 4 percent for Lao kip and from 10 percent to 8 percent for foreign currencies.
Under this initiative, commercial banks that implement the central bank’s policy to help businesses during the Covid-19 crisis would be able to offer more loans.
Other incentives to be offered by the Bank of the Lao PDR to commercial banks and financial institutions that support and cooperate with authorities are a reduction in the central bank loan interest rate from 4 to 3 percent a year for loan periods of less than seven days.
The participating banks will also be offered a reduction in the central bank loan interest rate from 5 percent to 4 percent a year for loan periods of 7 to 14 days and from 10 percent to 9 percent for loan periods of 14 days to one year.
Following the introduction of the central bank’s Covid-19 relief policy, Mr Phouthaxay said several banks and financial institutions had supported the scheme and that 202 customers who had taken out loans worth a total of 566 billion kip had been allowed to extend the repayment deadline. In addition, administration fees worth a total of 92 billion kip charged on the loan interest rate have been waived for 33 bank customers.
In rolling out the central bank’s new policy, commercial banks are in the process of offering 419 customers assistance schemes worth a total of 3,760 billion kip. They are also considering assistance for another 675 customers that would amount to 1,267 billion kip.
In addition to the introduction of this policy in response to the Covid-19 pandemic, the Bank of the Lao PDR has allocated 200 billion kip for low interest loans to SMEs each year. The central bank is also working with the relevant sectors to speed up the distribution of US$300 million in loans for SMEs provided by the Chinese government.
Mr Phouthaxay said business owners and workers who are suffering financial hardship due to the Covid-19 outbreak should submit a request for the extension of their loan repayment deadline to their creditors.

By Ekapone Phouthonesy
(Latest Update May 21, 2020)