SINGAPORE — The Monetary Authority of Singapore (MAS) said on Wednesday (April 1) that the Covid-19 (Temporary Measures) Bill will be “carefully scoped” to avoid impairing the interests of banks and Singapore’s role in international financial transactions.

The Bill, which was announced earlier on the same day, will cover only loans by small- and medium-sized enterprises (SMEs) with specific security located in Singapore, MAS said. This includes commercial or industrial property and plant, machinery or fixed assets that are used for business purposes.

The proposed law seeks to offer temporary relief to businesses and individuals who are unable to fulfil their contractual obligations because of Covid-19.

It also seeks to provide temporary cash-flow relief for these groups, which might otherwise have to pay damages or risk having their deposits or assets forfeited.

The Ministry of Law said on Wednesday that it intends to introduce and push through the legislation in a parliamentary sitting on April 7. If Parliament and the President approves, the proposed law is expected to come into force mid-April and expire a year later.

To complement the Bill, which also provides legal protection for SMEs, MAS had also announced a package of relief measures on Tuesday.

Among other things, banks have undertaken to defer principal payments on secured loans to SMEs until the end of the year. This is subject to assessment of the quality of the security — those with more than 90 days past due on loan repayments, as of April 6, will not be eligible.

“The proposed Bill provides legal protection for the specific security and hence complements banks’ relief measures for SMEs,” MAS said.

Under the proposed law, the contractual rights of banks are not affected. Banks, however, will not be allowed to start legal action, for a period of six months from the time the law takes effect, for a default on a loan covered under the Bill, MAS said.

“SMEs seeking the protection of the proposed Bill for their security should therefore bear in mind that they may incur late charges and higher interest, and end up paying more in the future,” MAS said.

“SMEs who face cash-flow difficulties should actively engage their banks to explore the options available under the package of relief measures announced by MAS, which include the deferment of principal repayment, with a corresponding waiver of late charges.”

Apart from the secured SME loans, MAS said that the proposed law has no implications for banks on any of their other facilities, transactions or contracts. It also has no implications on Singapore’s role as an international financial centre, the authority added.