BSP CIRCULAR NO. 1255

: Rural banks are covered under the penalty provisions of BSP Circular No. 1255 regarding the imposition of penalties on past due loans.
: No, rural banks may impose penalties on past due loans only if the borrower’s failure to pay on time is due to inexcusable neglect and the penalties are reasonable and not unconscionable.
: Inexcusable neglect is defined as the failure of the borrower to pay the loan on its due date for any reason except natural calamities (typhoons, floods), grave illness or death of the borrower or an immediate family member, or any other similar emergency beyond the borrower's control, provided these emergencies directly caused the non-payment.
: Examples include natural calamities such as typhoons and floods, grave illness or death of the borrower or any immediate member of his family, and other similar emergencies beyond the control of the borrower that directly cause non-payment.
: The penalty must be reasonable and not unconscionable.
: Penalties that are unconscionable are not allowed; the penalty must be reasonable and justifiable.
: Yes, Subsection 3304.5 a(2) of the Manual of Regulations for Banks and Other Financial Intermediaries was deleted.
: This Circular took effect immediately upon issuance on October 12, 1990.
: The Monetary Board of the Bangko Sentral ng Pilipinas approved the amendment by its Resolution No. 1032 dated September 28, 1990.