Kampala – The bank of Uganda has, on Friday, April 17, directed financial institutions to extend clients’ loan payment holiday up to a year.
In an April 17 statement sanctioned by the Acting Deputy Governor Adam Mugume, the Central Bank directed financial institutions to start extending loan payment holidays to clients of up to a year.
The bank regulator sustained that this relief was meant to benefits borrowers whose businesses have been affected by the partial Covid19 shut down.
“The loanees shall only be granted within the 12-month period with effect from April 01, 2020,” Mugume said
In a televised national address, President Museveni, on Tuesday, April 14, upheld that the lockdown is extended for an additional 21 days under the existing guidelines till May 5, 2020.
“Therefore, all the measures previously announced will stay in place for another 21 days. These additional 21 days, will definitely help us to defeat this virus decisively, or if not defeated totally, to prepare better as to how to cope with it,” said President Museveni.
Tasked to respond on how businesses and individuals with loans were going to clear – given the lockdown, President Museveni revealed that he would engage the Central bank on the matter.
“We are not going to pay loans for them because we don’t have that type of money, but I cannot support that the banks confiscate their property,” Museveni said.
President Museveni added: “There should be a way of stretching our time. When business resumes, the banks should not count this time when there was no work.”
Under the new guidelines by the Central Bank, the deputy Governor declares repayment reliefs must be primarily to benefit the borrower, and that the borrower must consent to the terms of the loan restructuring.
“Borrowers are encouraged to request, and SFIs (Supervised Financial Institutions) may offer credit relief. In either case, the borrower must consent to any credit relief granted,” Dr. Mugume emphasised.
“Consumer protection remains paramount, and any credit relief offered must be in the best interest of customers, and with full disclosure,” Mugume said.
“The credit status at the time of granting a repayment holiday shall remain unchanged for the duration of the said repayment holiday.” Dr. Mugume sustained.
He, however, emphasized that the credit relief measures announced by the central bank, “do not eliminate the debtor’s obligation to repay borrowed funds”