China lets banks waive bad loans from COVID-hit firms

Qualified businesses can apply for delays until end-Q2.

China will allow banks to delay their acknowledgment of bad loans from small businesses hurt by COVID-19, according to a joint statement by the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC).

Qualified small and medium firms with principal or interest due between 25 January and 30 June can seek a delay until end-Q2. Those with a long recovery period and good development prospects can negotiate with banks for additional extensions on a case-to-case basis.

All businesses in Hubei province, including large companies, can avail of the said provision. Banks are urged to extend special credit scales, preferential pricing for internal capital transfers, and slash comprehensive financing costs of SMEs by more than one pp from the previous year’s average level.

Banks are taking measures to avoid recognising bad loans, looking to shield themselves and cash-strapped borrowers from the fallout of the epidemic.

They were also told not to downgrade loans with missed payments or report delinquencies to the centralised credit-scoring system before end-June.

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