Small businesses impacted by the coronavirus crisis will be able to defer their loan repayments for six months under a plan put forward by the banking industry.
"This is a multi-billion-dollar lifeline for small businesses when they need it most, to help keep the doors open and keep people in jobs," Australian Banking Association chief executive Anna Bligh said on Friday.
"All that a business has to do is register their need with their bank," Ms Bligh said.
Friday's announcement follows the Reserve Bank cutting the interest rate to a record-low of 0.25 per cent in an historic suite of measures to offset a likely loss of jobs and income during the COVID-19 pandemic.
A Westpac outlet in Sydney. Source: AAP
Australia's small businesses collectively have $100 billion in loans and this bailout could put up to $8 billion back in their pockets, Ms Bligh said.
NAB said its personal customers will be able to pause home loan repayments for up to six months, including a three-month checkpoint.
For a customer with a typical home loan of $400,000, this will mean access to an additional $11,006 over six months, or $1,834 per month.
NAB's business customers will be able to freeze principal and interest repayments for up to six months on a range of business loans, including floating and variable rates, and equipment finance loans.
A coronavirus assessment clinic in Launceston. Source: AAP
The bank, like CBA, will not be passing on Thursday's rate cut to variable home loan customers.
For depositors, NAB has introduced a 10-month term deposit rate of 1.75 per cent in recognition that this low interest rate environment is hurting savers.
CBA on Thursday cut its one-, two- and three-year fixed home loan rates by 70 basis points to 2.29 per cent but like the other big four is yet to reveal its plans on loan repayment freezes.
CBA said it would also cut rates on cash-linked small business loans and increase rates on 12-month term deposits to 1.7 per cent.
Small businesses need relief and "they can rest assured their banks have got their bank," Ms Bligh said.
"There's no set definition in the relief package over which businesses are eligible, Ms Bligh said.
"We won't be looking to draw arbitrary lines in the sand," she said. "Banks know who their small businesses are."
While small businesses are clearly in crisis, so far the banks haven't heard that their mortgage customers are having trouble making loan payments, she said.
The bailout package was designed in consultation with the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.
Ms Bligh said for the past decade Australia's banking system had worked to increase its capital buffers in the event of a rainy day.
Regulators were now telling them it was appropriate to draw those buffers down now that that rainy day has now arrived, she said.
Prudential regulator APRA has already announced it will temporarily lower its expectations regarding bank capital ratios to ensure banks are well positioned to continue to provide credit to the economy in a coronavirus-affected environment.
