While there was a lot of appreciation for loan interest waivers on loans there was a segment of people unhappy with the Non Performing Loans before 29th February not getting the interest waiver though the principal payment had been deferred for all by three months.
Their main argument was that since they are already in a poor position unable to pay the loans the COVID-19 economic impact was an even bigger blow for them and so they would still be unable to pay the interest.
Their request seems to have been heard as now NPL accounts will also get the three-month loan waiver.
As of Friday evening Financial Institutions were still working out the detailed calculation of the exact financial implication of the waiving of loan interest. This is because while 50 percent of the cost will be borne by banks the other 50 percent of the cost the has to be borne by the government which needs the exact and even audited figures.
The earlier interest waiver came to a total of Nu 3.37 with the FIs and the government sharing the cost at 50 percent each.
A release from RMA said that on 10th April 2020, His Majesty the King, in the address to the nation, stated that one of the biggest concerns of the people and businesses is the difficulty faced in meeting their loan repayment obligations due to the economic uncertainties arising from the effects of the COVID-19 pandemic. In responding to the challenges, His Majesty the King commended the RMA and Financial Institutions for considering deferment of loan repayments and waiving interest payments for three months from April to June 2020.
While implementing the above measures, the borrowers, who fall under the category of non-performing loans, were not eligible for the aforesaid monetary measures.
The release said, “His Majesty, therefore, directed the RMA to discuss with the government and the FIs to explore feasibility of extending similar consideration to those who fall under the category. Following discussions, and upon submission, His Majesty commanded the interest waiver facility to also be extended to non-performing loan accounts for a period of three months (April–June 2020).”
Announcing the command, Prime Minister said the Kidu will provide immense relief to not just business people, but thousands who struggle to pay loans they sought for agriculture, education and other personal reasons.
To ensure that relief measures are adequate and inclusive, the Prime Minister on 30th April 2020, following discussions, announced that the interest waiver facility would also be extended to non-performing loan accounts for a period of three months (April–June 2020).
This interest waiver shall be subject to the same terms and conditions specified under Part A of the Monetary Measures issued on 14th April 2020 and the cost of interest waiver on NPL accounts shall be shared equally by the Government and Financial Service Providers.
The interest waiver will benefit 19,126 accounts.
The NPL by December 2019 was hovering around 9 percent which would have gone up in the subsequent months.