The Bangko Sentral ng Pilipinas (BSP) is moving to shield borrowers from the immediate financial fallout of natural disasters by proposing a regulatory relief package that includes a half-year moratorium on loan penalties.

Under a draft BSP circular currently under review, non-bank financial institutions (NBFIs) would be authorized to grant borrowers in calamity-stricken areas a grace period of up to six months for loan repayments.

According to the central bank, the relief must begin at the onset of the disaster and strictly prohibits the imposition of interest-on-interest or late-payment penalties during the window.

The proposed BSP guidelines offer even greater leeway for the agricultural sector, which has historically borne the brunt of typhoon and flood damage in the country.

Recognizing that crop cycles and land rehabilitation take time, the BSP suggested that NBFIs may extend grace periods for agricultural loans to one year or longer.

The central bank explained that this alignment with production timelines is intended to prevent farmers from facing liquidity crunches before their next harvest.

To prevent a spike in bad-debt figures from triggering regulatory alarms, the BSP plans to allow NBFIs to exclude calamity-hit borrowers from their past-due and non-performing loan ratios for up to one year.

The BSP said this accounting carve-out is designed to ensure that temporary cash-flow disruptions do not unfairly distort the financial health indicators of lending institutions.

Furthermore, the central bank is offering mechanism to smooth out the impact of disaster-related losses on balance sheets. Rather than recognizing the full hit of soured loans or physical asset damage in a single reporting period, non-banks may be permitted to stagger the recording of these losses over a three-year period.

Such a measure, BSP said, would prevent a sudden erosion of capital ratios, though it noted that institutions must still seek formal approval to utilize this specific relief.

Operational hurdles for displaced residents are also addressed in the draft. The BSP may allow NBFIs to temporarily relax identification requirements for clients who lost personal documents during a disaster.

To mitigate the risk of fraud, this flexibility would be tied to specific transaction caps and require customer certifications.

Administrative relief for the lenders themselves is also on the table. The proposal would triple the window—from one month to three months—for NBFIs to secure official approval for emergency loans extended to their own employees.

The central bank has set an April 10 deadline for industry stakeholders to submit feedback on the proposed rules.