THE country’s financial regulators said they will allow the nation’s lenders to delay recognizing bad loans from smaller businesses reeling from the coronavirus outbreak.

Qualified small- and medium-sized businesses nationwide with principal or interest due between Jan. 25 and June 30 can apply to delay repaying their debt, the China Banking and Insurance Regulatory said in a joint statement with the central bank late Sunday. In Hubei Province, the epicenter of the outbreak, the waiver applies to all companies, including large firms, according to the statement.

Regulators told lenders not to downgrade loans with missed payments or report borrowers’ delinquencies to the country’s centralized credit-scoring system before the end of June, according to the statement.

The push by banks and regulators to tamp down nonperforming loans (NPLs) is part of a broader government effort to shore up the Chinese economy, which some forecasters saying it may suffer a rare quarter-on-quarter contraction in the first three months of 2020.

In February, S&P Global said a prolonged health emergency could cause China’s nonperforming loan ratio to more than triple to about 6.3 percent, amounting to an increase of 5.6 trillion yuan (US$800 billion) in bad debt.

Still, the banking regulator said lenders need to categorize loans as nonperforming should the borrower fail to repay after resuming operations for a certain period of time, according to the statement.(SD-Agencies)