Regulator asks banks to allow eligible companies delay loan or interest payments

China has instructed its banking sector to ensure the implementation of the policy that allows eligible companies to delay loan or interest payments until the end of June, said a regulatory official on Sunday.

The China Banking and Insurance Regulatory Commission required banks to keep tracking the demand of funds by those companies that have to delay loan payments due to the novel coronavirus outbreak, strengthen monitoring of the financial position and the state of operation of relevant companies, and report to the regulator, said Ye Yanfei, an inspector of the commission's policy research bureau.

The banking and insurance regulator urged banks to integrate various internal resources to ensure that production resumption of qualified micro and small businesses and spring farming will not be delayed because financial services are not in place, Ye said at a news conference.

For the enterprises that cannot repay loans temporarily due to the pandemic, the Agricultural Bank of China, one of the five largest State-owned commercial banks, will not charge any penalty interest on overdue loans or lower credit ratings of relevant companies.

Up to now, the bank has granted extensions of 130 million yuan ($18.6 million) of loans to 252 small businesses, rearranged repayment plans for 870 million yuan of loans to 489 small businesses, and renewed 6.27 billion yuan of loans to 933 small businesses, said Zhan Dongsheng, executive vice-president of Agricultural Bank of China.

By the end of Saturday, the Agricultural Development Bank of China, a government-owned policy bank, had issued 53.5 billion yuan of contingency loans to 1,649 companies engaged in prevention and control of the pandemic.

The bank had also issued 137 billion yuan of loans to 2,650 companies, of which micro-, small- and medium-sized enterprises accounted for 78 percent, to help them resume production, said Lin Li, executive director and vice-president of the ADBC.

The People's Bank of China, the central bank, announced on Feb 26 it will offer 500 billion yuan of relending and rediscount funding to help smaller banks increase support to small- and medium-sized enterprises and the agricultural sector, in addition to 300 billion yuan of special relending quota allocated earlier this year to support activities that directly link with pandemic control by companies short-listed by authorities.

The ADBC offered more than one-sixth of the special relending funds it received from the central bank to Hubei province, the center of the novel coronavirus outbreak. Using these funds, it has issued 16.4 billion yuan of loans so far to 357 companies actively participating in pandemic control.

Considering that the Ministry of Finance will discount the interest rate of the special relending funds by 50 percent, the effective financing cost of enterprises will drop to around 1.18 percent at the ADBC, Lin said.

The banking sector has so far provided over 1.4 trillion yuan of credit to support the battle against the pandemic, according to data from the China Banking and Insurance Regulatory Commission.