The Central Bank of Kenya ( CBK) announced that it has extended loan restructuring by commercial banks to cover loans that were performing as of March 2 2020, but were restructured and went into arrears.
“…borrowers whose loans were performing before March 2, 2020, but were restructured and subsequently went into arrears will have three months (up to June 3 2021) to regularize their loans,” says CBK.
The announcement comes after the end of the one year period of emergency measures instituted on March 18 and 24, 2020, to protect bank borrowers from the adverse economic effects of the COVID-19 pandemic. These measures included loan restructuring by banks and regulatory flexibility up until March 2, 2021.
According to a press release by CBK, banks restructured loans worth Ksh 1.7 trillion by the end of February this year, amounting to 57% of the sector’s gross loans. After the resumption of repayments, outstanding loans totalled Ksh 569.3 billion, 19% of gross loans, as of the end of February. Nevertheless, at least 95 per cent of outstanding loans are being paid per restructured plans.
The banking sector’s lending took a hit from the COVID-19 pandemic, forcing many lenders to increase their provisions for non-performing loans. In the recent result, Stanbic grew its provisions for bad loans from Ksh 3.2 billion in 2019 to Ksh 4.9 billion while Co-operative bank ramped up its provision from 2.5 billion in 2019 to Ksh 8.1 billion in 2020.