Central Bank to give banks 500bn to restructure loans of SMEs

The Chamber of Commerce and Industry has enthusiastically “interrogated” the Central Bank on financial supporting measures for SMEs

“Why can not the Central Bank grant zero-rate loans to all enterprises in this emergency?” Vice President of the Chamber of Commerce and Industry of the Russian Federation Natalya Dybova asked the Central Bank during a teleconference dedicated to state supporting measures for small and medium-sized businesses on 8 April. Head of the Service of Consumer Rights Protection and Access of Financial Services of the Bank of Russia Mikhail Mamuta replied that 500 billion rubles were allocated to maintain the loan portfolio of SMEs, while banks were exempted from creating big reserves to restructure loans.

500bn to save loan portfolio of SMEs

The Central Bank is taking radical measures to launch a conveyor belt of anti-crisis refinancing. In the next few days, 90 Russian banks will be able to receive additional funding of the Central Bank to refinance the loan portfolio of small and medium-sized businesses. 500 billion rubles are allocated for this purpose. The Central Bank expects this money to be provided until 30 April. The total limit of loans for SMEs granted by authorised banks will be 700 billion rubles.

This is how Mikhail Mamuta made entrepreneurs “glad”: “The Central Bank has expanded the opportunity to receive our concessionary money at 4% a year for as many banks as possible. About 90 banks will be able to participate in this programme. This covers the majority of small and medium-sized enterprises”.

Within this funding amount, SMEs can have loan holidays and obtain vital salary loans at a zero rate. The latter is especially important because enterprises have been obliged to pay workers salaries since 10 April.

Mamuta explained why the anti-crisis grace period was equal to 6 months, not, for instance, 12: “We thought that SMEs wanted to get a loan postponement, but at the first stage we decided to start with six months because according to all forecasts we base on we see this is to be enough for the end of the acute period of restrictive measures and the beginning of recovery”.

The representative of the regulator assures he is following how the situation is unfolding and ready to consider the measures in a longer term.

Without additional reserves

To quickly introduce loan holidays and grant salary loans, the Central Bank has simplified the state of banks.

“All banks are freed from the necessity to create additional reserves when restructuring credits and loans of SMEs. This means they won’t have additional expenses. If you come as an entrepreneur and ask for a payment deferral, they shouldn’t calculate additional reserves. From a perspective of regulation, today it is possible,” Mamuta stressed. But only those banks can obtain the funding at 4% a year that have a high rating (from A-) and on the condition that they “haven’t significantly reduced the portfolio of loans to SMEs by 1 April”.

Mikhail Mamuta debunked rumours that a borrower’s loan history will get worse after the holiday. “What will happen to the credit history if an entrepreneur used restructuring? The answer is short and simple: nothing. We gave special instructions that credit history doesn’t get worse. This won’t influence our ability to service loans in the future, take out new loans.”

The Central Bank recommended banks to structure the loans beyond the limits established in the law on loan holidays. “What should entrepreneurs do if the amount of their loan exceeds the cap fixed by the law?” Our instruction, our recommendations say that loans can anyway be restructured and must be restructured within banks’ own programmes,” he said.

“Go to the bank with your advocate from the CCI”

However, Mamuta admitted that “not all is that smooth” when you ask for loan holidays: “I will agree in advance that banks aren’t eager to meet borrowers halfway”.

In this case, he advised going with an “advocate” from the Chamber of Commerce and Industry. Entrepreneurs who have gone to a bank and asked it for loan holidays and haven’t managed to get them due to a refusal of the bank can go to business associations — the Chamber of Commerce and Industry (CCI), Opora Russia and Business Russia.

“If an entrepreneur went to a bank and was denied loan holidays for some reason, though the sector he works in is recognised as the most affected, he can turn to one of the business associations he is a member of. They will serve as an advocate in banks. We, in turn, will also quickly consider and receive all signals,” the representative of the regulator promised support from the top.

He reminded that SMEs whose income has decreased by 30% and more compared to an average monthly income in 2019 can obtain loan holidays. At the same time, sole traders and self-employed people can hope for the support as legal entities. But they must fit the highest limit on consumer loan — 300,000 rubles for sole traders and 250,000 for natural person.

The Central Bank in general recommended all banks to restructure loans in the interests of SMEs. According to the CB, over a thousand agreements have been restructured regardless of their activity.

Why have the limits on sectors and purpose been lifted? “We don’t know where concessions will be needed now, this is why we have lifted limits on the sector and purpose,” Mamuta explained.

How to receive zero-rate salary loan

Most of the questions were about announced supporting measures for those who don’t have enough revenue to pay salaries to employees. Today banks must start to grant this money, but Natalya Dybova said: businesses are complaining that the applications are sent back. While companies must finish paying March salaries in a few days.

Last week, head of the Ministry of the Economic Development Reshetnikov announced that SMEs in affected sectors could obtain a loan at a zero rate to pay salaries to employees. A calculation will be done according to the minimum wage per employee. “If enterprises face a shortage of money to pay salaries despite this, a zero-rate loan programme for salaries has been launched,” he said.

Mikhail Mamuta reminded people that the government had allocated 150 billion rubles, which would be given to banks at 4% a year, for this purpose. In his opinion, there is a buzz because the mass media announced the programme before the documents were ready. He says the topicality of the issue is to disappear in the next days.

“We agreed with commercial banks that they didn’t make money from this programme. They are receiving concessionary money from the Bank of Russia at 4% and offering enterprises the same 4% to pay six months later,” Mamuta stressed.

Also, the Bank of Russia has simplified concessionary lending and expanded its action. Banks are receiving money at 4% from the Central Bank too, but they are obliged to lend them to borrowers at no more than 8,5% a year for three years. It is important that only a limited circle of SMEs could take advantage of concessions. For instance, commerce or excise goods didn’t meet the concessionary conditions. Loans couldn’t be obtained to replenish working capital, while now it is possible.

Restrictions on sectors have been lifted. 175 billion rubles at 8,5% are given to lend to SMEs without sectoral restrictions.

Leasing holiday under question

It isn’t excluded that entrepreneurs can obtain leasing holiday for six months. The Central Bank and Ministry of Economic Development are considering this issue.

“There is a problem here: leasing companies unlike banks and microfinance institutions aren’t regulated by the Central Bank. We can’t apply the same regime of stimulating regulation, give them special rights to both banks and other creditors to them. But something can be done. I have already said about financial support, together with the Ministry of Economy we are considering additional possibilities to obtain leasing holidays. This issue is being considered,” Mamuta said. According to him, nowadays leasing companies can obtain cheap funding in a bank at 8,5% in a financing programme of leasing services for small and medium-sized enterprises.

By Luiza Ignatyeva