Waiver of loan repayment holidays: regulator explains
With the onset of the coronavirus pandemic, many borrowers were struggling as their incomes shrank. A loan repayment law (No.
The regulator leaves open the chance of a borrower failing to confirm their income reduction of 30% within this timeframe (e.g., through a calculation mistake when applying for holidays). The Bank of Russia believes that responsible borrowers should be saved the painful consequences of this should they fail to provide documentary evidence of their right to holidays.
In its information letter, the Bank of Russia recommends that in such circumstances banks and microfinance companies consider re-approval of loan repayment holidays for responsible borrowers based on a lender’s proprietary restructuring programme from the same start date as that of loan repayment holidays under law.
Thanks to this approach, the borrower will incur no overdue debt, with their credit history unaffected. In turn, the Bank of Russia recommends that Russian citizens apply to lenders in advance with the intention of coming to a mutually acceptable solution.
Also, the Bank of Russia provides recommendations on a course of action in cases of a borrower having obtained loan repayment holidays but deciding to opt out of them. If this occurs before the regular loan repayment date and the borrower and the bank agree to reinstate the original schedule of payments, the borrower should suffer no negative consequences even if they failed to submit documentary evidence of income reduction.
Should the borrower, having applied for loan repayment holidays, decide to opt out prior to the lender’s confirmation or prior to day one of the holidays, the borrower is entitled to withdraw the application and elect not to submit documentary evidence of income reduction. This does not in any way undermine the borrower’s right to apply for holidays in future.
Separately, the Bank of Russia wrote to remind credit institutions that the above recommendations have no implications for reserve requirements. As regards reserve requirements, credit institutions should use guidance set forth in Information Letter No. IN-01-41/72, dated 17 April 2020.