QuestionsQuestions (BSP CIRCULAR NO. 248)
Non-performing loans refer to loan accounts whose principal and/or interest is unpaid for thirty (30) days or more after due date or after they have become past due in accordance with existing rules and regulations. The definition applies to both lump-sum loans and installment-based loans, but the treatment differs depending on the installment frequency.
As a general rule, if the principal and/or interest remains unpaid for thirty (30) days or more after due date (or after they become past due under existing rules), the loan account is considered non-performing. For lump sum loans, the total outstanding balance becomes NPL based on that delinquency threshold.
For quarterly, semi-annual, or annual installment loans, the circular provides that the total outstanding balance shall be considered non-performing.
For loans payable in monthly installments, the total outstanding balance is considered non-performing when three (3) or more installments are in arrears.
The entire outstanding balance of the loan/receivable is considered past due when total arrearages reach ten percent (10%) of the total loan receivable balance, consistent with the criteria under Circular No. 143 (Oct. 1, 1997).
For monthly installment loans, arrears are measured by number of installments in arrears (3 or more). For other modes (e.g., daily/weekly/semi-monthly), when arrearages reach ten percent (10%) of total loan receivable balance, the entire outstanding balance is considered past due.
The circular amends Item e of Subsec. X306.1: Monthly—minimum 3 installments in arrears; Quarterly—1 installment; Semestrally—1 installment; Annually—1 installment. Additionally, there is a percentage-based exception when arrearages reach 20% of the total outstanding balance.
When total amount of arrearages reaches twenty percent (20%) of the total outstanding balance of the loan/receivable, the total outstanding balance is considered past due regardless of the number of installments in arrears.
The term “installments” refers to principal and/or interest amortizations that are due on several dates as indicated or specified in the loan documents.
Yes. Restructured loans shall be considered non-performing in accordance with existing rules and regulations.
All items in litigation, as defined in the Manual of Accounts for Banks, shall be considered non-performing loans.
It amends Circular No. 202 (Sec. 1) and Circular No. 143 (Sec. 1, specifically Item e of Subsec. X306.1 of the Manual of Regulations for Banks).
The circular takes effect immediately, with adoption dated 26 June 2000 and issued upon approval by the Monetary Board via Resolution No. 707 dated May 5, 2000.
It states that non-performing loans, as a general rule, include loan accounts whose principal and/or interest is unpaid for 30 days or more after due date or after they have become past due in accordance with existing rules. For certain modes (e.g., daily/weekly/semi-monthly), it expressly ties past-due status to the 10% arrearage criterion, which in turn leads to non-performing classification of the entire balance.
The loan documents’ schedule of due dates for principal and/or interest amortizations, since “installments” are those amortizations due on several dates as specified in the loan documents.