Bank of Uganda encouraged commercials banks to restructure loans whose repayment by customers had been affected by the pandemic. This was aimed at minimizing the adverse effects of COVID-19 on the economy.
As a result, cumulative loans that have been granted credit relief between April 2020 and end September 2020 amount to Shs6.7 trillion, which is 40 percent of the banking sector’s loan portfolio, BoU’s Quarterly Financial Stability Review September 2020 report released by the Central Bank, indicates.
The report further revealed that the acceptance rate for applications is high at 97.4 percent.
In some scenarios, banks have been forced to restructure some loans for a second time and these increased by 60.8 percent from Sh.264.1billion in August 2020 to Sh.424.9 billion in September 2020, and these account for 8.1percent of all restructured loans.
“This trend suggests that the financial condition of some borrowers that received credit relief remains distressed,” BoU’s report says.
A scrutiny into the restructured loans indicate that the credit relief is benefiting sectors that were forecast to be hardest hit by the pandemic including; trade, real estate, manufacturing and transport.
Additionally, the amount of loans under credit relief that are past-due by at least one monthly repayment increased from Shs134.1 billion as at end of July 2020 to Shs763.2 billion at end-September 2020.
The Central Bank has projected that the pandemic has heightened systemic operational risks in the banking system, with potential adverse implications for profitability.
