Debtors of closed banks given bigger discounts
State-run insurer Philippine Deposit Insurance Corp. (PDIC) announced an “enhanced” and “extended” version of its program that helps borrowers of closed banks maintain their creditworthiness and prevent the foreclosure of their mortgaged assets.
The PDIC said its Closed Bank Loan Incentive Program (CLIP) will be extended until the end of 2025 to benefit more borrowers of shuttered banks.
At the same time, the maximum principal balance threshold has been doubled from P5 million to P10 million, covering more borrowers.
Launched in 2021, the CLIP was designed to help borrowers of banks that are already out of business settle their outstanding debts through discounts and waivers on the amount they owe.
But such an incentive can only be availed if the discounted or reduced loan obligation is paid in full through a one-time cash settlement.
As the statutory receiver of closed banks, the PDIC collects loan payments from borrowers of shuttered banks to augment the liquid funds that can be used to settle claims of the banks’ creditors.
Apart from the increase in qualifying principal balance threshold, the enhanced CLIP also features better discounts and waivers.
Up to 50% principal discount
The state insurer explained that such incentives vary based on the year the bank was closed. Their availability will also depend on whether the loan is clean, secured by a chattel mortgage or pledge, or by a real estate mortgage (REM).
The PDIC said borrowers of banks closed in 2023 and prior years who have clean loans or whose obligations are secured by a chattel mortgage or a pledge, can benefit by as much as a 50-percent discount on their outstanding principal balance. Unbooked interest, penalties and other charges will be fully waived.
Meanwhile, borrowers whose loans are secured by REM may avail of a reduced unbooked interest for as low as 3 percent per annum—depending on the age and status of their loans—and a full waiver for unbooked penalties and other charges.
Previously, clean loans were subject to a discount of up to 30 percent only, while unbooked interest on loans secured by REM could only be reduced to 5 percent per annum.
At the same time, borrowers of banks closed in 2024 and 2025 with clean loans or whose obligations are secured by chattel mortgage or pledge are entitled to a 50-percent discount on their outstanding principal balance and a full waiver of unbooked interest, penalties and other charges.
For borrowers whose obligations are secured by REM, the new program will reduce the interest rate on unbooked interest to 5 percent per annum and include a full waiver of unbooked penalties and other charges.
