…hotels with low occupancy might be eligible 

Financial institutions (FIs) are likely to offer loan deferment from six months to one year to the borrowers facing genuine financial hardships after the current loan deferment period ends on June 30 this year.

However, the deferments will be granted by individual FIs based on a thorough client assessment on a case-by-case basis.

The Royal Monetary Authority previously had set loan assessment criteria, which individual banks used to develop their own procedures.

The banks have already notified the borrowers about the deferment process so that they can submit requests for deferment eligibility.

A banker said that the assessment would be strict and consider factors such as borrowers’ income, occupancy, and overall business performance. 

For construction loans, occupancy rates for hotels, rental income, location for buildings, and other sources of income will be considered during the assessment.

“Borrowers with demonstrably not adequate or reduced income can apply for deferral from six months to one year. Hotels, particularly those with low occupancy rates, are likely to be considered for deferment,” the banker added.

Another banker said that most of the loan deferrals so far were provided to the hotel businesses that were significantly affected by the Covid-19 pandemic.

“The occupancy rate of 35 percent and above would be considered serviceable; below 35 percent would require loan deferment,” he said, adding that most of the hotels three star and below could face problems.

Monthly occupancy rate would be assessed for hotels; quarterly if the hotel business is working well.

In the manufacturing and industry, despite improving production and exports, the banks will assess loan status on a case-by-case basis. Location, however, could play a significant role. 

Similarly, assessments will be conducted on a case-by-case basis for retail and trade. 

Contracts facing delays with government payments could also receive loan deferment. 

A banker said that the FIs are actively refining assessment tools to ensure that borrowers have the capacity to repay after the deferment period. 

Discouraging loan deferment, a banker said that previously, interest accumulated during the initial Covid-19 deferment period was parked in a fixed equated installment facility account, allowing borrowers to repay it over ten years. 

However, interest accumulated for deferrals granted after June 2024 should be paid immediately or will be added to the loan principal, resulting in higher EMIs.

Out of 149, 065 loan accounts that amount to Nu 215.88 billion with FIs, 12, 941 accounts, amounting to Nu 56.5 billion have been deferred until June this year.