Notice of PBC, CBIRC, MOF, NDRC and MIIT on Extending the Policy of Provisional Deferral of Loan Principal and Interest for Micro, Small and Medium-Sized Enterprises
Yinfa No. 122 
To implement the decisions and arrangements of the CPC Central Committee and the State Council on coordinating COVID-19 control and economic and social development, strengthen policies to support businesses and ensure employment, and alleviate enterprises’, especially micro, small and medium-sized enterprises’ (MSMEs) financial strain in connection with the repayment of principal and interest by end-2020, the policy on provisional deferrals of eligible loans’ principal and interest will be extended in market- and law-based principles. Upon approval of the State Council, we hereby notice the following matters:
I. Applicable scope
For inclusive loans issued to micro and small businesses (MSBs) that mature between June 1, 2020 and December 31, 2020 (including loans to MSBs and business loans to self-employed businesses and MSB owners, with a total credit line of up to RMB10 million per borrower similarly hereinafter), the policy on provisional deferral of principal and interest will be implemented in accordance with the requirement of maximum coverage. For other loans issued to MSMEs which are to mature before end-2020 and loans to enterprises facing particular difficulties, such as large-sized enterprises on the international supply chain (foreign trade enterprises), the enterprises and banking financial institutions may independently negotiate on the deferrals of principal and interest.
The PBC will work with relevant departments to provide policy support for banking financial institutions to implement the policy of provisional deferrals of principal and interest and offer relevant incentives to locally incorporated banking financial institutions (hereinafter referred to as locally incorporated banks) like urban commercial banks, rural commercial banks, rural cooperative banks, village banks, rural credit cooperatives and private banks, for them to implement the policy.
II. Repayment arrangements of matured principal and accrued interest on inclusive MSB loans
For the principal of inclusive MSB loans that mature between June 1, 2020 and December 31, 2020, banking financial institutions should, according to the businesses’ applications for deferred repayments of the principal and in light of the impact of COVID-19 on them and their operating conditions, grant time-limited deferral of loan principal and interest through loan extension, renewal or other means. The deadline for principal repayment may be extended to March 31, 2021. If the above-mentioned loans involve guarantees, banking financial institutions should negotiate with the businesses and guarantors to retain effective guarantee arrangements or provide replacements in line with business principles.
For the interest on inclusive MSB loans that are payable between June 1, 2020 and December 31, 2020, banking financial institutions should, according to the businesses’ applications for deferred repayments of the interest and in light of the impact of the pandemic on them and their operating conditions, provide them with arrangements for deferred repayments of the interest within a specified time limit. The deadline for interest repayment may be extended to March 31, 2021 with penalty interest repayments exempted. Detailed plans for deferred interest repayments may be independently negotiated and reasonably determined by banking financial institutions and relevant businesses.
III. Incentives for locally incorporated banks to implement deferred repayments of principal and interest on inclusive MSB loans
To fully motivate locally incorporated banks, the PBC and the Ministry of Finance (MOF) will offer incentives to locally incorporated banks, with the amount equal to 1 percent of inclusive MSB loan principal under deferred repayment arrangements through special purpose vehicles (SPVs). If the repayment of a loan principal is deferred for multiple times within a specified time limit, the incentives will only apply to the first deferral.
To apply for such incentives, locally incorporated banks should submit relevant documents to central sub-branches of the PBC in sub-provincial cities or prefecture-level cities, while being responsible for the authenticity of such documents. Central sub-branches of the PBC in capital cities of provinces and above should work with CBIRC local offices at the same level to supervise the business operations of deferred repayments of principal and interest of banking financial institutions within their jurisdiction to ensure the authenticity, accuracy and integrity of data provided by locally incorporated banks. Where locally incorporated banks are found to behave illegally such as false reporting, misreporting or illicitly acquiring incentive funds, the PBC will retrieve the issued funds, disqualify them for further applications, and punish them in accordance with the law.
IV. Work requirements
The policies should enable maximum coverage. For inclusive MSB loans, banking financial institutions should handle the deferred repayments of principal and interest and reasonably arrange the schedule for repayments to avoid concentrated maturity, as long as enterprises make such applications, retain effective guarantee arrangements or provide replacements according to business principles, and commit to keeping employment basically stable. For loans issued to MSMEs and enterprises facing particular difficulties, such as large-sized enterprises on the international supply chain (foreign trade enterprises), the enterprises and banking financial institutions may independently negotiate on the deferral of principal and interest.
Supervision and regulation should be continuously strengthened to effectively control credit risks. While proceeding with the provisional deferral of principal and interest, banking financial institutions may require enterprises to provide a letter of commitment to retain its employees. During the period of deferred repayments, the enterprises should ensure stable employment at large. For loans with provisional deferred repayments of principal and interest, banking financial institutions should establish special records, perform specific statistics, closely monitor changes in loan quality, and draw up plans for potential credit risks.
V. Supporting policies
For liquidity issues that emerge from banking financial institutions’ implementation of this policy, the PBC will use a mix of monetary policy instruments to ensure adequate liquidity at a reasonable level in the banking system.
For loans with deferred repayments of principal and interest, banking financial institutions should determine risks according to the essence. The pandemic should not lead to the downgrading of the risk category of loans or affect enterprises’ credit records.
While assessing the business performance of state-owned or their shareholding banking financial institutions in 2020, finance departments at all levels should fully consider the policy impact of deferred repayments of principal and interest on such financial institutions, and make reasonable adjustments and assessments.
The Notice should take effect as of the date of issuance. Loans, the principal and interest payments of which have already been temporarily deferred in accordance with the Notice of CBIRC, PBC, NDRC, MIIT and MOF on Implementing Temporary Deferment of Loan Principal and Interest Repayments for Micro, Small and Medium-Sized Enterprises (Yinbaojianfa No. 6 ) may still be eligible for deferred repayments in accordance with the present Notice.
The People’s Bank of China
China Banking and Insurance Regulatory Commission
Ministry of Finance
National Development and Reform Commission
Ministry of Industry and Information Technology
June 1, 2020
Source:People's Bank of China
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