85 banks avail BSP’s NPL, PDL reprieve

Published May 10, 2021, 7:00 AM

by Lee C. Chipongian

Eighty-five banks have applied to exclude P18.8 billion of non-performing loans (NPL, P12.2 billion) and past due loans (PDL, P6.6 billion) from the Bangko Sentral ng Pilipinas’ (BSP) soured loans’ classification as of end-February this year.

The BSP considers this a small number of banks that applied for the reprieve, or just four big banks out of 46, five thrift banks of 48, and 74 rural and cooperative banks out of 434 supervised by the central bank as of end-March 2021.

 As of end-February, BSP reported only four universal and commercial banks applied for the reprieve with P3.2 billion combined PDL and P6.3 billion NPLs. The 74 rural and cooperative banks, in the meantime, have P3 billion worth of PDL and P4.7 billion NPLs reclassified under the relief measure. The rest are five thrift banks with P300 million PDL and P200 million NPLs, and two non-banks with P1 billion NPLs.

As part of COVID-19 relief measures, banks can apply for the exclusion of eligible loans from the PDL and NPL classification until end-December this year. These are loans affected by the two Bayanihan laws’ grace periods in 2020. The BSP basically allowed BSP supervised financial institutions (BSFIs) to exclude the exposures of borrowers affected by the public health crisis from the determination of a BSFI’s PDL and NPLs.

PDLs are unpaid loans after its due date, or 30 days or more. NPLs, also considered as impaired loans or classified as “doubtful or loss”, are unpaid loans for more than 90 days from due date. BSFIs which grant a grace period or restructure loans of borrowers affected by COVID-19 may exclude these loans from the PDL and NPL classification until December 31.

Based on a BSP report, about 1.2 percent or P6.6 billion of P548.4 billion PDL were considered loans under regulatory forbearance. As for NPLs, the share of loans under regulatory forbearance is 2.8 percent or P12.2 billion of a total P428.1 billion.

The BSP said this is still a minimal amount and so far, the report noted that most of the financial institutions that applied the regulatory relief measure were rural and cooperative banks.

Past due loan ratio as of end-February is at 5.19 percent while gross NPL ratio is at 4.05 percent.

The BSP said the forbearance measure on the exclusion of the PDL and NPLs “will not significantly affect” the reported past due loans and NPLs of the banking system.

It said that the level of restructured loans of banks as of end-February increased to P199.4 billion, about four times the P45 billion same time in 2020. This is equivalent to 1.9 percent of total loans, up from 0.4 percent last year. “It should also be noted that while there has been adjustment in the past due loans and NPL brought about by the forbearance measures, asset quality indicators are expected to continue to be affected as cash flows of businesses and individuals are still impaired and loan payment moratorium has ended,” the BSP said. 

Last month, April, the BSP extended the period for the exclusion of eligible loans from the PDL and NPL classification which means that loans which should have been reclassified as past due as of March 8, 2020, and loans that have become past due or have been considered as a bad loan six months from March 8, 2020 up to March 31 this year may be excluded from the past due and NPL classification until December 31, 2021.

“As a general policy, BSFIs are encouraged to offer less onerous payment terms or restructure loan accounts with the consent of borrowers. In restructuring affected loan accounts, the original loan contractual terms and conditions should be modified in accordance with a formal restructuring agreement,” according to BSP Deputy Governor Chuchi G. Fonacier in the circular memo.