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More Credit to the Private Sector at a Lower Interest Rate

Business credit lines recorded a 21.1% expansion with a significant decrease of the interest rate from the beginning of the preventive and compulsory social isolation as a result of the measures adopted by the BCRA.

Loans as a whole averaged a 5% increase—i.e., ARS95.80 billion—in the credit stock in pesos to the private sector, with a clear acceleration as from the first week of April. So far in April, it grew 7.5%.

As of April 24, credit to 81,993 MSMEs reached ARS120.59 billion at interest rates lower than 24%. About 53% of these loans were channeled to working capital, and 36% to the payment of salaries. Credit granted to the rest of legal persons (big companies) at interest rates lower than 24% has also been on the rise.

Business credit lines expanded by 21.1% ( ARS136.70 billion) from the beginning of the quarantine period. They were mainly channeled through overdrafts and unsecured promissory notes. Overdrafts were the most dynamic line due to their inherently automatic nature. As days went by, and mainly after banks were open again to the public, customers have drawn on unsecured promissory notes to a greater extent.

While financing at interest rates lower than 24% increased, interest rates on business credit lines exhibited a significant fall as from the beginning of the quarantine period.

As to interest rates on overdrafts, they recorded a fall of more than 10 p.p. from the beginning of the quarantine period.

  • Interest rates on loans to MSMEs fell by 8.3 p.p.
  • Interest rates charged on other legal persons exhibited a 10 p.p. decrease.
  • Interest rates on unsecured promissory notes fell by 13 p.p. against March 19, and now stand at 26% on average.

The performance of interest rates was fairly homogeneous among the different types of companies, which substituted credit lines as banks became operative once again. This may be explained by the lower financing cost and longer term—on average—of promissory notes compared to overdrafts.

Individuals have also accessed to different credit lines, namely:

  • The extension of maturity for credit card bills falling due until April 30. Customers may pay their bills in 9 instalments at fixed amounts with a three-month grace period.
  • Credit at zero interest rate in twelve instalments with a six-month grace period for individual tax payers and self-employed individuals.
  • Removal of late payment charges on loan instalments (personal, pledge-backed, mortgage-backed, among other loans) due as of June 30. Customers may ask for payment deferrals for instalments with maturity dates between April 1 and June 30, 2020, to the month following the one originally provided in the contract.

From the beginning of the health emergency, the BCRA has also ensured cash provisioning in the more than 18,000 ATMs and in 17,500 withdrawal points throughout the country.

This time, it ordered that financial institutions cannot charge any fees for transactions carried out at ATMs (withdrawals, deposits, balance checking) up to June 30, regardless the institution and the ATM company involved, or whether the individual is a client or not.

It also established that all financial institutions have to ensure that both legal and natural persons may daily withdraw amounts in all ATMs to a minimum of ARS15,000, regardless of whether they are clients or not.

April 28, 2020.

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