BETWEEN April 25 and May 9, members of the Banking Association of South Africa extended an additional R3.84 billion in debt relief to individual customers experiencing financial distress due to the national lockdown. Karen Sandison African News Agency (ANA)
BETWEEN April 25 and May 9, members of the Banking Association of South Africa extended an additional R3.84 billion in debt relief to individual customers experiencing financial distress due to the national lockdown. Karen Sandison African News Agency (ANA)

Billions in debt relief paid to individuals, enterprises

By ANA Time of article published May 18, 2020

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Members of the Banking Association of South Africa (Basa) have so far extended coronavirus debt relief of more than R11.5 billion to individuals and R9bn to commercial and small and medium enterprises (SMEs), the association said yesterday.

In the two weeks between April 25 and May 9, Basa members extended an additional R3.84bn in debt relief to individual customers experiencing financial distress due to the national lockdown, Basa said in a statement.

“This brings the cumulative amount of relief offered by Basa members since they started assisting individuals to R11.58bn,” it said.

This amount would continue to grow as banks processed applications for debt relief. As at May 9, applications for relief had been received from individuals regarding more than 2 million credit agreements. So far, more than 1.7 million had been granted, Basa said.

During the same period, Basa members provided additional cash-flow relief, including payment breaks, to commercial and SMEs of R1.7bn.

“This brings the cumulative assistance offered by Basa members to commercial and SMEs to a total to date of R9bn.”

Of the 116000 applications received for relief from commercial and SMEs, more than 109 000 had already received assistance.

The cumulative amount of assistance offered to individuals and commercial businesses and SMEs amounted to R20.58bn.

Cash-flow relief for eligible businesses and individuals was an important part of keeping the economy functioning and preserving companies and jobs during the pandemic and national lockdown, Basa said.

The relief measures were available to customers in good standing who might not be able to meet their credit agreement payments in the short term as a result of the impact of the pandemic, and who would most likely be able to meet their obligations after the relief period, and as the lockdown was eased.

Customers were considered to be in good standing if they were up to date with their repayments on February 29 and had a good track record of paying their debts on time.

Remedies offered by the banks differed, but may include:

* Assistance with processing credit life insurance claims. Credit life insurance policies typically covered a period of loan repayments or the outstanding debt in the event of death, disability or retrenchment or loss of income. Banks were communicating with their customers who had credit life insurance and were helping them to initiate a claim where the policy was linked to the bank’s credit agreement. In many cases, this was the most viable remedy for customers with this cover.

* Instalment reduction for a limited period. Interest and fees on loans would still accumulate and would have to be paid by the customer. This could result in an extension of the term of the loan, which could incur higher costs.

* A payment break. Interest and fees on the respective loans would still accumulate and would have to be paid by the customer. This may result in an extension of the term of the loan, which could incur higher costs. Such payment breaks varied from between one and three months, and were provided either pro-actively by the bank or at the request of the customer, depending on their credit risk guidelines.

* The relief measures also applied to Shariah-compliant financial services and products. Customers who were uncertain as to what relief was available for Shariah-compliant products, were urged to contact their bank.

* Customers who were already in debt review should contact their debt counsellor who would motivate a new repayment proposal to the bank, which would be considered case-by-case.

* Small businesses that were already in business rescue should contact their business rescue practitioner. Banks would deal with these enterprises case-by-case.

“It is in the best interests of all bank customers to continue to meet their obligations as best they can. Bank customers are both depositors and borrowers. Deposits extended as home and personal loans, among others, must be recovered to allow banks to repay, with interest, customers who expect their money on demand,” Basa said.

The relief measures granted by banks did not envisage debt write-off, but rather leniency in terms of the repayment of loans for a period. Due to the volume of calls being received, reduced staff levels, physical distancing, and other health and safety requirements to which banks had to adhere, customer channels were inevitably experiencing delays.

“This is being addressed by banks, but we ask customers to understand the circumstances in which staff are operating at present,” Basa said. 

 African News Agency (ANA)

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