PBC, jointly with CBIRC, the Ministry of Finance (MOF), the Ministry of Industry and Information Technology (MIIT), and the National Development and Reform Commission (NDRC), issued two notices on support to micro, small, and medium-size enterprises (MSMEs) in the context of COVID-19 crisis. One notice extends the policy of phased deferment of loan principal and interest repayments for MSMEs while the other notice addresses stepping up of credit support for micro and small businesses. The notices shall be implemented from the date of their issuance. Additionally, PBC, jointly with CBIRC, NDRC, MIIT, MOF, State Administration for Market Regulation, CSRC, and State Administration of Foreign Exchange, issued the guiding opinions on further strengthening financial services for MSMEs. PBC also published questions and answers (Q&As) on the monetary policy instruments launched amid the COVID-19 crisis.
The notice on deferring loan principal and interest repayments requires that, for principals of inclusive loans issued to micro and small businesses that due before the end of 2020 and for accrued interest of inclusive micro and small business loans that existed before the end of 2020, banking financial institutions shall grant time-limited deferment of loan principal and interest repayments to enterprises on application. The repayment date is being extended to as late as March 31, 2021 and penalty interest shall be waived. For other loans issued to MSMEs that are due before the end of 2020 and loans to enterprises facing particular difficulties, such as large-size enterprises (foreign trade enterprises) along the international supply chain, the enterprises and banking financial institutions may, at their discretion, negotiate on the deferment of loan principal and interest repayments.
The notice on credit support specifies that, starting from June 01, 2020, PBC will apply monetary policy tools in an innovative way by using RMB 400 billion special quotas of central bank lending to purchase 40% of new inclusive micro and small business credit loans issued by qualified locally incorporated banks between March 01, 2020 and December 31, 2020, in a bid to encourage banks to expand credit issuance to micro and small businesses and support more micro and small businesses to receive unsecured credit support. The notice on credit support also stresses that banking financial institutions shall focus on examining the first source of repayment, reduce reliance on collateral, and diversify the system of credit loan products, to ensure a significant rise in the proportion of inclusive micro and small business credit loans in 2020.
The guiding opinions on further strengthening financial services for MSMEs sets down 30 policy measures on the following seven aspects:
- Implementing the policies that provide credit support for MSMEs in their resumption of work and production
- Launching a project on enhancing commercial banks’ capability to provide financial services for MSMEs
- Carrying out reform to improve the external policy environment and the incentive and restraint mechanism
- Giving play to the role of the multi-tiered capital market in providing financial support
- Stepping up efforts to build the MSME credit system
- Optimizing local financing environment
- Enhancing the organization and implementation of relevant work
Keywords: Asia Pacific, China, Banking, COVID-19, Credit Risk, Q&A, Loan Moratorium, Q&A, PBC, CBIRC
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