Financial institutions are prohibited from charging interest on loan payments that have been deferred as part of the month-long lockdown imposed by the government to fight the coronavirus pandemic, according the Bangko Sentral ng Pilipinas.
In a memorandum, the central bank justified the move by pointing to the implementing rules and regulations of the law that granted President Duterte emergency powers to deal with the COVID-19 outbreak.
“It mandates all covered institutions to implement a 30-day grace period to all loans with principal and/or interest falling due within the enhanced community quarantine period, without incurring interest on interest, penalties, fees and other charges,” BSP Governor Benjamin Diokno said in the document sent to all central bank-supervised financial institutions last week.
In it, he explained that the one-month grace period would apply to each loan of individuals and entities with multiple loans.
“Covered institutions shall not charge or apply interest on interest, fees and charges during the 30-day grace period to future payments/amortizations of the borrowers,” Diokno said, referring to the provisions of the Republic Act No. 11469 or the “Bayanihan to Heal As One Act.”
His pronouncements were based on the law’s implementing rules that were approved by Finance Secretary Carlos Dominguez III last April 1.
Diokno said that BSP-supervised financial institutions were likewise “prohibited from requiring their clients to waive the application of the provisions of the [law].” Furthermore, the central bank chief said that no waivers previously executed by borrowers covering payments falling due during the quarantine period would be considered valid.
The accrued interest for the 30-day grace period may be paid by the borrower on a staggered basis over the remaining life of the loan or, if they chose to do so, they may settle the accrued interest in full on the new due date.
The BSP chief also reminded banks that the initial 30-day grace period would automatically be extended if the lockdown period is extended by President Duterte.
Originally set to end after April 12, policymakers are now debating whether to extend the Luzon-wide quarantine period by another two weeks to help prevent what experts fear will be a second wave of virus transmissions if the lockdown ends too early. INQ