Borrowers will get 1% interest reduction if they repay their loans fully during deferment
A 100% interest waiver for another three months, from July 1 to September 30 this year will be paid by the Druk Gyalpo’s Relief Kidu from National Resilience Fund to the Financial Institutions (FIs).
And from October 2020 to March 31, 2021, 50% of the interest payment will be granted as the Druk Gyalpo’s Relief Kidu from the National Resilience fund while remaining 50% will be paid by the borrowers.
This was stated in the Standard Operating Procedures (SOP) to all the FI released by the Royal Monetary Authority (RMA) issued last week.
According to the RMA, the Druk Gyalpo’s Relief Kidu-support for interest payment for the next nine months from July 2020-March 2021 will be implemented.
Since the interest during this period is fully paid from the National Resilience Fund with 100% interest payment support, borrowers have to pay only the principal portion of the EMI.
Since 50% of the interest is paid from the National Resilience Fund, the borrowers have to pay principal portion of the EMI and 50% of interest portion of the EMI.
Continuing from phase I, all loans outstanding as on April 10 this year will be eligible for the interest payment support except for the loans to government, loans to financial institutions and staff incentive loans. All loans covered under the interest payment Kidu will be eligible to defer their loan repayment for one year until June 30, 2021.
The SOP states that loan deferment can either be full or partial of the Equated Monthly Installment (EMI). However, partial repayments will cover at least the interest portion of the EMI or any other agreed repayment modality.
Interest will continue to accrue at normal interest rate on the principal outstanding during the deferment period. The interest accrued will be capitalized at the end of the deferment period. Any repayment from borrowers during the deferment period will be adjusted first towards the past dues, interest accrued and then to the principal outstanding.
According to RMA, Financial Service Providers (FSPs) will also offer one percent interest rate reduction to borrowers who repay their EMIs after necessary adjustment of interest waiver regularly and fully as per the agreed repayment schedule during the entire deferment period.
Borrowers have to pay full EMI comprising of both principal and interest from April till June 2021. Rebate of one percent interest rate reduction will be calculated on the principal outstanding during the deferment period, that is, from July 2020 to June 30, 2021.
For the performing loans the rebate of one percent interest rate reduction will be directly adjusted to the principal outstanding thereby reducing the principal outstanding. Thereafter, the interest computation shall be on the reduced principal.
For non-performing loans the rebate of one percent interest rate reduction will be adjusted first against the past overdue, if any and the balance will be adjusted against the principal outstanding. For those loans that are fully repaid during the deferment period, FSPs will refund the interest differential to borrowers within three months after liquidation of loans.
In order to continue supporting micro and CSI borrowers including informal and mobile businesses and borrowers, the microloan and working capital loan to CSIs under the monetary measures phase I will be extended by another 12 months until June 30, 2021.
Dechen Dolkar from Thimphu