Our Information Note on the new regulations as to the possibility to defer low interest loans of tradesmen and craftsmen in the fight against COVID-19 has been published.

1. INTRODUCTION

The Presidential Decree No. 2283 dated 24 Mart 2020 (the “Decree”) has been published in the Official Gazette dated 25 March 2020 and numbered 31079. The objective behind the introduction of the Decree is the regulation of the principles and procedures with respect to the deferral of repayments of low interest loans disbursed by Türkiye Halk Bankası Anonim Şirketi (“Halbank”) to tradesmen and craftsmen adversely affected by the COVID-19 pandemic.

2. BACKGROUND INFORMATION

The Law on the Disbursement of Interest Supported Loans and Profit Share Supported Funds by Public Banks (the “Law”) was published in the Official Gazette dated 30 December 2006 and numbered 26392 in order to support tradesmen and craftsmen.

In line with this objective, tradesmen and craftsmen in association with regional unions linked to the Turkish Central Union of Tradesmen and Craftsmen Credit and Surety Cooperative Associations (“Cooperative Associations”) are provided with low interest loans by Halkbank covered by the Cooperative Associations pursuant to the Law and applicable decrees.

3. CREDIT DEBTS TO BE DEFERRED

Pursuant to the Decree, the repayment of low interest loans obtained from Halkbank through the Cooperative Associations prior to 31 March 2020 on the basis of the Law by tradesmen and craftsmen adversely affected due to the outbreak of the COVID-19 pandemic will be deferred where requested.  

A deferral will be possible with respect to the repayments of such loans which will mature between 1 April 2020 and 30 June 2020. Repayments will bear interest according to their initial maturity date and will be deferrable for 3 months without being subjected to any additional interest. Accordingly, by way of an example, a tradesman or craftsman will be able to postpone the repayment of its loan which is due on 30 April 2020 for a period of 3 months and pay such instalment together with interest at its agreed interest rate on 30 July 2020. Each instalment payable following such deferral will be postponed accordingly. According to the Decree, the deferral of a borrower’s existing debt will not prevent the borrower from taking out another loan from Halkbank.

4. ADDITIONAL PROTECTIONS

The Decree further prohibits the initiation of enforcement proceedings with respect to the deferred loan repayments during the deferral period.

5. SPECIAL CONDITION FOR DEFERRALS

Tradesmen and craftsmen wishing to benefit from the said deferral options are required to submit an undertaking stating that they will not decrease the number of employees, i.e. lay off any of their employees during the term of deferral. Otherwise they will be removed from such deferral scheme.

6. CONCLUSION

The Decree constitutes part of the measures in the fight against the impact of the COVID-19 pandemic and aims to protect tradesmen and craftsmen. As such, the prohibition of enforcement proceedings alongside the possibility to defer low interest loan repayments strengthens the effectiveness of the anticipated protection. Finally, the undertaking as to maintaining the number of employees sought from tradesmen and craftsmen wishing to benefit from such deferral scheme offers an additional protection to employees.