Penalty on Past Due Rural Bank Loans

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BSP CIRCULAR NO. 1255: Penalty on Past Due Rural Bank Loans

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Title Supreme Court: Penalty on Past Due Rural Bank Loans

Law: Bsp Circular No. 1255

Decision Date: Oct 12, 1990

Rural banks are authorized to impose reasonable penalties on borrowers for past due loans due to inexcusable neglect, excluding cases of natural calamities, grave illness, or other emergencies beyond the borrower's control.

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Definition of Inexcusable Neglect

Inexcusable neglect means failure to pay loan on its due date for reasons other than:
1. Natural calamities such as typhoons and floods.
2. Grave illness or death of the borrower or any immediate family member.
3. Other similar emergencies beyond the borrower’s control.
The calamities or emergencies must be the direct cause of non-payment to be considered excusable.

Amendment and Deletion of Previous Provision

The Monetary Board approved the amendment of Subsection 3304.5 a(1) of Book III of the Manual of Regulations for Banks and Other Financial Intermediaries.
Subsection 3304.5 a(2) of the Manual was deleted.

Effectivity and Authority

The Circular took effect immediately upon issuance.
Issued by the Governor, Jose L. Cuisia, Jr., and enacted through Monetary Board Resolution No. 1032 dated September 28, 1990.

END