By: Atty. Gregorio B. Austral, CPA

Mandatory grace period for loans

under Bayanihan 2

The Bangko Sentral ng Pilipinas recently released the Implementing Rules and Regulations (IRR) for the Bayanihan to Recover as One Act (R.A. No. 11494). Under this IRR, the covered institutions include all the BSP supervised financial institutions with lending operations such as banks, quasi-banks, non-stock savings and loan associations, credit card issuers, trust departments/corporations, pawnshops, and other credit-granting entities under its supervision.

Under the IRR, all covered institutions shall implement a non-extendible, mandatory one-time sixty (60)-day grace period for all existing, current and outstanding loans with principal and/or interest, including amortizations, falling due on or before December 31, 2020 without incurring interest on interests, penalties, fees, or other charges. The parties are not precluded from mutually agreeing to a grace period longer than 60 days.

To illustrate the 60-day grace period’s application, let us assume that the due date of a loan with monthly amortization falls due on September 20. This due date will be moved to November 19. Following this example, the BSP said, if the last payment due date of the said loan before the application of the mandatory grace period is on September 20, 2024, said last payment due date should be moved to November 19, 2024. The application of the mandatory 60-day grace period effectively moves the payment due dates of the entire loan.

The principal and the accrued interest falling due from the effectivity of the Act until December 31, 2020, may be paid by the borrower in full after the application of the 60-day grace period. The borrower may also pay on a staggered basis until December 31, 2020. The borrower may also pay on a staggered basis until December 31, 2020. Likewise, the parties may agree to pay the principal and interest on a staggered basis beyond December 31, 2020.

Borrowers have the option to apply or not to apply the mandatory grace period. However, it must be emphasized that the law only covers loan accounts that are existing, current and outstanding as of September 15, 2020. Past due accounts are not covered. If a borrower has two loans, one is current, and the other is delinquent, he may avail of the grace period only for the current one. The past-due account will not be covered. Restructured loans that are considered as current and performing may also avail of the grace period.

Although the law gives a grace period for the payment of loans without incurring interest on interests, penalties, fees, or other charges, this does not prevent the covered institutions to charge accrued interest using the stipulated interest rate in the loan agreement during the mandatory grace period. (Source: BSP Implementing Rules and Regulations of R.A. No. 11494)