Central Bank clarifies
zero-interest loan scheme
Program extended till June
The Central Bank (BDL) has given additional directions to banks and financial institutions to provide zero-percent interest rate loans to customers in financial difficulties. It has also extended its deadline from May to June 2020.
The extension came as part of a detailed version of a BDL circular issued last March that had instructed the banks to provide these exceptional loans which should also be free from commissions to existing customers who had previously obtained loans from the banks. The proceeds of the new loans must be used to settle maturing debts. Corporate borrowers could use the loans to pay salaries and finance their operations.
The new circular specifies that these exceptional loans must be repaid in the same currency of the original loan. It also allows customers to settle the loan before its five-year maturity after agreeing with the bank. They could also make a full prepayment without paying any commissions or fees to the bank.
The circular also details how the banks must pay the salaries of the employees of corporate customers who obtain these exceptional loans. The salaries must be paid free of any fees. They could be paid in cash, through transfers to bank accounts, or through a debit card or a domiciliation account.
BDL said in the new circular that the customers eligible for these exceptional loans are those, who because of the current economic crisis are unable to repay debts, payrolls, operating expenses, or raw material purchases. They must also lack any resources, such as credit accounts or cash collateral, to settle these financial obligations.
Businesses that are not subject to the current lockdown, such as pharmacies, bakeries, sellers of foodstuff, cannot benefit from these loans unless the bank can determine they have defaulted on their obligations because of the current circumstances.
BDL will provide five-year credit facilities in dollars at zero-interest rate to the banks and financial institutions against these exceptional loans.
Copy of the circular
Reported by Shikrallah Nakhoul
Date Posted: Apr 22, 2020