Small businesses impacted by the coronavirus crisis will be able to defer their loan repayments for six months under a plan put forward by the banking industry.
“This is a multi-billion-dollar lifeline for small businesses when they need it most, to help keep the doors open and keep people in jobs,” Australian Banking Association chief executive Anna Bligh said on Friday.
The announcement follows the Reserve Bank cutting the interest rate to a record-low of 0.25 per cent in an historic suite of measures to offset a likely loss of jobs and income during the COVID-19 pandemic.
Australia’s small businesses collectively have $100 billion in loans and this bailout could put up to $8 billion back in their pockets, Ms Bligh said.
NAB said its personal customers will be able to pause home loan repayments for up to six months, including a three-month checkpoint.
For a customer with a typical home loan of $400,000, this will mean access to an additional $11,006 over six months, or $1,834 per month.
NAB’s business customers will be able to freeze principal and interest repayments for up to six months on business loans, including floating and variable rates, and equipment finance loans.
The bank, like CBA, will not pass on Thursday’s rate cut to variable home loan customers.
For depositors, NAB has introduced a 10-month term deposit rate of 1.75 per cent in recognition that this low interest rate environment is hurting savers.
Westpac meanwhile on Friday copied CBA’s move of reducing its one, two and three-year fixed home loan rates to 2.29 per cent, and raised rates on 12-month term deposits to 1.7 per cent.
Westpac also said it would cut overdraft rates and interest rates for small business customers.
“This is a once in a lifetime event and a unified response by government, regulators and corporate Australia is exactly what we need,” acting chief executive Peter King said.
ANZ said it would reduce rates on variable interest small business loans and pass on 15 basis points of the RBA’s rate cut to its variable interest rate home loan customers.
It will also let home loan customers request a deferral of home loan repayments for up to six months, with interest capitalised.
ANZ chief executive Shayne Elliott said the move was the “right thing to do for our existing customers,” given the impact of the crisis.
There’s no set definition in the relief package over which businesses are eligible, Ms Bligh said.
“We won’t be looking to draw arbitrary lines in the sand,” she said. “Banks know who their small businesses are.”
The bailout package was designed in consultation with the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.
Ms Bligh said for the past decade Australia’s banking system had worked to increase capital buffers in the event of a rainy day.
Regulators were telling them it was appropriate to draw those buffers down now that that rainy day has arrived, she said.
AAP
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