July 8 (Reuters) - Australian banks will extend the loan repayment deferral period for borrowers struggling to service their debts due to the coronavirus to 10 months from six, the peak banking body said on Wednesday.
The four-month extension from a previous end-date of September reflects concerns that economic repercussions from the pandemic will continue when current government income support expires.
Customers who can restart paying their loans will be required to do so, once the existing deferral period ends. However, those still struggling will be given options to restructure existing loans, the Australian Banking Association (ABA) said in a statement.
If that is also not possible, and arrangements are not in place at the end of the initial deferral period, customers will be eligible for an extension for another four months, the association said.
On March 20, the ABA announced that banks will defer loan repayments for those financially affected by the pandemic for up to six months, offering relief to Australians hurt by lockdowns.
In its Wednesday update, the ABA added that a deferral extension of up to four months would not be automatic and would be provided only to those who genuinely need extra time.
“This next phase of bank support will avoid a ‘cliff’ for customers in September and give them the breathing space they need to work with their bank and get back on their feet financially,” said Anna Bligh, ABA’s chief executive.
In a separate statement, the prudential regulator said it would extend the period during which banks are allowed to disregard the repayment deferral period as a period of arrears in their capital adequacy and regulatory reporting processes. (Reporting by Rashmi Ashok in Bengaluru and Byron Kaye in Sydney; Editing by Sam Holmes)