The Chinese central bank has extended the deferrals for financial inclusion loans that were first introduced in 2020 as part of efforts to buffer the economy from the impacts of the COVID-19 pandemic, as well as flagged the use of monetary policy tools to provide additional support.
On 2 April the People’s Bank of China (PBOC) led the issuance of the “Notice Concerning Further Extending Policies for Deferring Repayments of Principal and Interest on Financial Inclusion Micro and Small-enterprise Loans and Matters in Relation to Implementation Timeframes for Credit Loan Support Policies” (关于进一步延长普惠小微企业贷款延期还本付息政策和信用贷款支持政策实施期限有关事宜的通知).
PBOC said that it would further extend policies for deferring the repayment of financial inclusion MSE loans until the end of 2021, in tandem with the extension of other credit loan support policies.
Under the policy borrowers and banks can independently negotiate for the “phase-based deferral” of principal and interest repayments for financial inclusion MSE loans (including MSE loans involving credit sums of under 10 million yuan and MSE business loans) that are scheduled to mature during the period from 1 April to 31 December 2021.
The Notice said that banks should “maintain substantive risk judgements” when deferring loan repayments, and that they should not downgrade the risk categories of loans as result of COVID-19, or let it impact the credit record of enterprises.
Financial authorities are called upon to give “full consideration to the impacts of loan deferral policies when assessing the 2021 performance results of state-controlled or state-invested banks, and make rational adjustments and assessments.”
PBOC will also make use of monetary policy tools to encourage smaller financial institutions such as municipal commercial banks, rural village commercial banks, rural village cooperative banks and rural credit societies to extend terms for financial inclusion MSE loans by at least six months.
According to state-owned media the scope for support via monetary policy tools will be loans with terms of no less than six months that are made during the period from 1 April to 31 December 2021, with the support ratio being 40% the loan sum.
The total funds amount will be kept within the reload quota as approved by China’s State Council.
The Notice further states that where liquidity problems arise due to banks implementing these policies PBOC will make “integrated use of multiple types of monetary policy tools to make sure that liquidity within the baking system remains rationally ample.”