Banks plan loans lifeline

Measures aim to save small businesses

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-billiondollar lifeline for small businesses … to help keep the doors open and keep people in jobs,” Australian Banking Association chief executive Anna Bligh said yesterday.

The announcement follows the Reserve Bank cutting the interest rate to a record-low of 0.25 per cent in a 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 would 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 $1834 a 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.

Westpac yesterday copied CBA’s move of cutting 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.

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 would also let home loan customers request a deferral of repayments for up to six months, with interest capitalised.

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 told them it was appropriate to draw those buffers down now that rainy day had arrived, she said.