Repossession of assets a last resort for banks
November 25, 2020 7:26 am
Repossession of assets will be the last resort for any bank to recover their money but have also warned customers to be honest.
With thousands of Fijians on repayment holiday, the Association of Banks says there are options available that can avoid any drastic action.
ABIF Chair Rakesh Ram says they don’t want customers to take advantage of the current situation because there have been people defaulting loans pre COVID-19.
“Even if we start repossessing the assets and put the assets in the market for sale, we are going to flood the market. So it’s not going to help the customer. It’s not going to help the bank. So we need to look outside the square both the customers and the bank and work together to find an option or look at alternatives to give banks that comfort that its debt is intact or safe.”
Ram says all the banks are trying every way possible to assist their customers during this difficult time while struggling to stay afloat.
He adds a time will come where banks will need to recover their loans depending on the situation.
“The number of customers on repayment holiday and no interest and repayments being paid, it also increases the risk of your loan by any accounting standards or by any credit assessment standards. So what it means is that the banks then need to create a very high level of provisioning for bad debt or doubtful debt. With a number of customers on repayment holiday exceeding three months, six months, nine months some are twelve months, the banks have to provide increased provision for doubtful debts and bad debts.”
The Chair says banks will continue to assist those affected on a case by case basis.