Today, March 18, Cabinet’s regular meeting was organized to touch on current economic state of Mongolia and steps to take concerning the COVID-19 pandemic.
Following the cabinet meeting, Minister of Finance Ch.Khurelbaatar and President of the Bank of Mongolia D.Lkhagvasuren held a press briefing on the Cabinet’s approval of a decision to make deferrals on consumption and business loan repayment and their interests for 90 days.
According to the Finance Minister, more than 1000 individuals and business entities have expressed their financial difficulties to repay loans as the country has been under the heightened state or readiness since January due to the coronavirus pandemic.
Concerning this, the Council for Financial Stability met yesterday, March 17 to make this decision.
President of the Bank of Mongolia D.Lkhagvasuren highlighted that the Council introduced an option to ease loan requirements by adding certain changes to banking asset classification regulations and other rules with a view to help bank consumers impacted by restrictions and measures in place due to the pandemic, such as temporary closures of businesses, lockdowns, etc.
Mr. Lkhagvasuren further said that the government has been monitoring the difficulties encountered by the public outside of their control. “When borrowers fail to repay their loans, their credit rating goes down. Therefore, it has been decided that the borrowers’ credit rating would not be changed for six months since January 27, 2020, when the country went into the heightened state of readiness.”
Mr. Lkhagvasuren continued “Moreover, the aforementioned regulations have been amended so that borrowers are allowed not to pay the principle repayment and interests for 90 days. Putting off the loan repayment and interests for three months will just make the loan payment period longer.”
Although commercial banks are expected to suffer some losses as a result of the decision, the central bank president assured that their losses will be mitigated somewhat by regulations overtime. “There is also a possibility for the central bank to offer measures aimed at providing funding based on their assets at the recently-decreased policy rate to the banks, who could encounter troubles due to the postponement."
Non-bank financial institutions and saving and credit cooperatives are also subject to the decision.
71.3 percent or 419 thousand borrowers are estimated to hold consumption loans as of now.
Those who are struggling to repay their loans are advised to contact their banks to update their contracts according to the new repayment measure and commercial banks are advised to arrange online service for their customers in this connection.