Five departments jointly issued the "Notice on Further Implementing Phased Deferral of Principal and Interest Repayments for Loans to Small, Micro, and Medium-Sized Enterprises."

Due to the impact of the epidemic, small and medium-sized micro enterprises have generally faced difficulties in cash flow. To ease the repayment pressure on loans for these enterprises, the People's Bank of China, the China Banking and Insurance Regulatory Commission, the Ministry of Finance, the National Development and Reform Commission, and the Ministry of Industry and Information Technology jointly issued the “Notice on Further Implementing Phased Deferral of Principal and Interest Repayments for Loans to Small and Medium-Sized Micro Enterprises” (Yin Fa [2020] No. 122). Number, hereinafter referred to as the “Notice”).

  The Notice emphasizes that banking financial institutions should extend the maturities of inclusive small and micro loans to the fullest extent possible. For principal amounts of inclusive small and micro loans due before the end of 2020, as well as for 2020... For the interest payable on inclusive small and micro loans that were outstanding as of the end of the year, banking and financial institutions should, upon request from enterprises, provide a grace period for principal and interest repayment, with the maximum extension period reaching March 31, 2021, and waiving any penalty interest charges. For other loans to small, medium, and micro enterprises, as well as loans to large international supply chain enterprises (including foreign trade enterprises) that were due before the end of 2020 and are facing special difficulties, enterprises may independently negotiate with banking and financial institutions to extend the repayment terms for principal and interest. Banking and financial institutions shall adhere to substantive risk assessments and shall not downgrade the risk classification of loans solely because of pandemic-related factors, nor shall they affect enterprises’ credit records.

Notice from the People's Bank of China, the CBIRC, the Ministry of Finance, the National Development and Reform Commission, and the Ministry of Industry and Information Technology on Further Implementing Phased Deferral of Principal and Interest Repayments for Loans to Small, Micro, and Medium-sized Enterprises

Yinfa [2020] No. 122 Number

  Headquarters of the People's Bank of China in Shanghai, all branches and business management departments, and central branches in provincial capital (or provincial-level) cities.

Okay, to the central branches of all sub-provincial-level cities; to all banking and insurance regulatory bureaus; to the finance departments (bureaus), development and reform commissions, and departments in charge of small and medium-sized enterprises in each province, autonomous region, municipality directly under the central government, city under separate planning, and Xinjiang Production and Construction Corps; to the China Development Bank, all policy banks, state-owned commercial banks, joint-stock commercial banks, and the Postal Savings Bank of China:

To implement the decisions and arrangements of the Party Central Committee and the State Council on coordinating COVID-19 prevention and control with economic and social development, strengthen policies supporting stable enterprise operations and employment retention, and alleviate the financial pressure faced by enterprises—especially small, medium, and micro-sized enterprises—in repaying principal and interest this year, in accordance with market-oriented and rule-of-law principles, we will further introduce phased deferrals of principal and interest payments for eligible loans. With the approval of the State Council, we hereby notify you of the relevant matters as follows:

I. Scope of Policy Application

  For June 2020 For inclusive small and micro loans due between January 1 and December 31—including loans to small and micro enterprises with credit lines of RMB 10 million or less per borrower, as well as operating loans for individual business households and small and micro enterprise owners (the same applies hereinafter)—principal and interest payments will be temporarily deferred in accordance with the “extend as much as possible” requirement. For other small, medium, and micro enterprise loans and loans to large enterprises in international industrial chains (including foreign trade enterprises) that were due before the end of 2020 and are facing special difficulties, enterprises may independently negotiate with banking and financial institutions to defer principal and interest payments.

  The People's Bank of China, together with relevant departments, provides policy support for banking financial institutions in implementing the loan repayment deferral policy. Additionally, it offers corresponding incentives to local legal-person banking financial institutions—including city commercial banks, rural commercial banks, rural cooperative banks, township and village banks, rural credit cooperatives, and private banks—(hereinafter referred to as "local legal-person banks") for their implementation of the inclusive small and micro enterprise loan repayment deferral policy.

II. Arrangements for the Payment of Principal and Accrued Interest on Maturing Inclusive Small and Micro Loans

  For June 2020 For principal amounts of inclusive small and micro loans due between January 1 and December 31, banking and financial institutions shall, based on enterprises’ applications for loan repayment deferral and taking into account the impact of the epidemic on their operations and overall business conditions, provide enterprises with a certain period of deferred repayment through measures such as loan extension and renewal. The latest possible repayment date may be extended to March 31, 2021. For the aforementioned loans that involve guarantees, banking and financial institutions shall cooperate with the enterprises and the guarantors.

The guarantor and other parties shall negotiate to maintain an effective guarantee arrangement or provide an alternative arrangement in accordance with commercial principles.

For June 2020 From January 1 to December 31, for inclusive small and micro loans, banking financial institutions shall, based on enterprises’ applications for deferred interest payments and taking into account the impact of the epidemic on their operations and overall business conditions, grant enterprises a deferral arrangement for interest payments for a specified period. The deadline for loan interest payments may be extended up to March 31, 2021, with no penalty interest charged. The specific repayment schedule for the deferred interest shall be independently negotiated and reasonably determined by both the banking financial institution and the enterprise.

III. Incentive Measures for Local Legal Entity Banks Implementing the Policy of Deferring Principal and Interest Payments on Inclusive Small and Micro Loans

To fully motivate local legal-person banks, the People's Bank of China, in collaboration with the Ministry of Finance, will provide these banks with an incentive equal to 1% of the principal amount of inclusive small and micro loans they have extended and for which repayment has been deferred, through special-purpose vehicles. Within the prescribed period, if the same loan is deferred multiple times, the incentive will be applied only upon the first deferral.

Local corporate banks applying for incentive funds shall submit the required materials to the sub-provincial city central branch or the prefectural city central branch of the People's Bank of China and shall be responsible for the authenticity of the submitted materials. The branches of the People's Bank of China at or above the provincial capital (or provincial-level) city central branch, together with their counterparts from the local banking and insurance regulatory authorities, shall supervise the implementation of loan principal and interest repayment deferral services by banking financial institutions within their jurisdictions, ensuring that the data provided by local corporate banks are true, accurate, and complete. Should any local corporate bank be found engaging in violations such as falsifying or misreporting data or fraudulently obtaining incentive funds, the People's Bank of China will reclaim the incentive funds already disbursed, revoke the local corporate bank’s eligibility to apply for incentive funds in the future, and impose penalties in accordance with the law.

  IV. Job Requirements

  “Extend as much as possible” to broaden the coverage of policy measures. For inclusive small and micro loans, as long as an enterprise submits a request for deferring principal and interest payments, and provided that it maintains effective collateral arrangements—or offers alternative arrangements—in accordance with commercial principles and commits to keeping employment levels broadly stable, banking and financial institutions should process such requests promptly and arrange repayment schedules reasonably to avoid concentrated maturities. For other loans extended to small, medium, and micro enterprises—as well as loans to large international supply-chain enterprises (including foreign trade enterprises) facing special difficulties—enterprises may independently negotiate with banking and financial institutions to defer principal and interest payments.

  Continue to strengthen supervision and management to effectively control and prevent credit risks. When handling phased deferrals of principal and interest payments, banking and financial institutions may require enterprises to submit a commitment letter guaranteeing stable employment. During the loan deferral period, enterprises shall maintain basic stability in their employment levels. Banking and financial institutions shall establish special ledgers for loans subject to phased deferrals of principal and interest payments, conduct dedicated statistical analyses, closely monitor changes in loan quality, and proactively develop contingency plans to address any potential credit risks.

  V. Supporting Policies

  Regarding the liquidity issues arising from banking and financial institutions’ implementation of the above-mentioned policies, the People’s Bank of China is comprehensively employing a variety of monetary policy tools to maintain reasonably ample liquidity in the banking system.

  For loans subject to deferred principal and interest payments, banking and financial institutions should adhere to substantive risk assessments, refrain from downgrading loan risk classifications due to pandemic-related factors, and ensure that corporate credit records remain unaffected.

  When assessing the 2020 operating performance of state-owned and equity-participated banking financial institutions, fiscal departments at all levels should fully take into account the impact of the phased policy of deferring principal and interest payments on the performance of these institutions and provide appropriate adjustments and evaluations.

  This notice shall take effect from the date of its issuance. Previously issued notices, such as the “Notice of the CBIRC, People’s Bank of China, NDRC, Ministry of Industry and Information Technology, and Ministry of Finance on Temporarily Deferring Principal and Interest Payments on Loans to Small, Micro, and Medium-sized Enterprises” (CBIRC [2020] No. 6), remain in force. Loans for which temporary deferrals of principal and interest payments have been arranged may continue to be eligible for such deferrals in accordance with the provisions of this notice.

  People's Bank of China, CBIRC

Ministry of Finance, National Development and Reform Commission, Ministry of Industry and Information Technology

2020 June 1st of the year