Bank of Uganda announces loan repayment holidays for borrowers affected by the coronavirus outbreak as a measure to mitigate the economic impact of COVID-19
Bank of Uganda (BoU) has ordered all commercial banks including other financial institutions to suspend loan repayment for borrowers up to at least one year as a result of coronavirus pandemic.
This comes days after President Museveni proposal to see all banks suspend and remove loan repayment for its borrowers during this time as a result of the coronavirus that has hit many individuals financially.
Following the outbreak of the coronavirus in Uganda, the government has enforced tight measures and other directives such as the lockdown and night curfew to control virus spread.
This has since then left many individuals with no option but to stay home unemployed and having to rely on their few money savings to buy food and other house essentials to survive.
Besides many of them especially those who had acquired loans earlier before the lockdown has been fearful that they might lose their collateral security to banks in case they fail to pay back the loans in time.
However, information now onboard indicates that Bank of Uganda has passed a directive to commercial banks including other financial institutions to extend loan repayment holidays because of the ongoing coronavirus pandemic.
According to BoU, credit relief measures, loan tenor extensions and any other forms of debt restructuring covered in existing regulations will all be granted within the 12 months with effect from 1st April.
“The allowable credit relief measures and terms thereof include repayment holidays for a maximum of 12 months, loan tenor extensions, and any other forms of debt restructuring covered in existing regulations,” a statement from the acting bank deputy governor, Adam Mugume read.
“These credit reliefs shall only be granted within the 12 months with effect from April 01, 2020.”
Relatively, the Central Bank says this is done in the best interest of its customers because the decision to offer a credit relief to a customer or decline a request for a credit relief from a customer is a responsibility of the Supervised Financial Institution.
“…any credit relief(s) offered must be in the best interest of customers, and with full disclosure. The decision to offer a credit relief to a customer or decline a request for a credit relief from a customer is the responsibility of the Supervised Financial Institution (SFI).”
Meanwhile, BoU encourages borrowers to pose requests for credit relief to the SFI who may decide to offer and in either case, the borrower must consent to any credit relief granted to him or her.
Besides the Central Bank also adds that the credit status at the time of granting a repayment holiday shall remain unchanged for that duration.
Credit Status in business involves a bank’s willingness to lend money to a particular person or organization, depending on their ability to repay the loan.
“Borrowers are encouraged to request, and Supervised Financial Institutions may offer credit relief. In either case, the borrower must consent to any credit relief granted,” a statement read.
It added; The credit status at the time of granting a repayment holiday shall remain unchanged for the duration of the said repayment holiday. The prepayment of arrears as a condition for restructuring a credit facility is suspended for 12 months with effect from April 01, 2020.”