HomeLatest FeedsTechnology NewsNGM: the SME interest rate cap will be introduced on April 1

NGM: the SME interest rate cap will be introduced on April 1

All this can take place without any increase in the installments of any of the businesses concerned.

The SME interest rate cap will be phased out on April 1, 2024, but the repayment installments of none of the affected businesses will increase, the Ministry of National Economy (NGM) announced. Since November 1, 2022, the SME interest stop has provided significant assistance to small and medium-sized enterprises with variable interest rates, non-subsidized HUF loans with a term of at least one year. According to the NGM, the measure helped a total of more than 50,000 SMEs.

In recent years, the central bank base rate has risen to an extraordinary extent, and with it the rate of corporate loan interest. The government then decided to extend the institution of the interest stop to SMEs in order to ensure that the increase in installments does not bankrupt hundreds and thousands of businesses, so that Hungarian jobs are not endangered either.

Thanks to the reduction of inflation below 4 percent, the improving economic situation, and the recent reduction in interest rates, the SME interest rate cap can be introduced without any increase in the repayment installments of any of the companies concerned.

The NGM pointed out that in the recent period there has been a significant decrease in the domestic interest rate environment, as a result of which the 3-month BUBOR will fall below the 7.77 percent level set by the SME interest rate cap until April 1, 2024, according to market expectations.

When the measure was introduced, the 3-month BUBOR, which is decisive for corporate loans, was at a level above 16.5 percent, while the government’s measure fixed the reference interest rate for the same term at 7.77 percent (3-month BUBOR). Since its introduction, the measure has eased the repayment burdens of more than 50,000 Hungarian SMEs by a total of about HUF 150 billion and affected a loan portfolio of approximately HUF 1,500 billion.

As a result of the cooperation between the Ministry of National Economy and the banking association, the banks have undertaken to reduce the interest margin above the BUBOR as a reference rate to 0 percent for new corporate loan contracts between February 1 and April 30, 2024, for six months after disbursement. All of this will reduce the interest rate of corporate loans by 2-4 percentage points, contributing to the recovery of market lending and economic growth, in addition to stimulating investments and developments, the NGM stated in its announcement.

At the same time, the ministry drew the attention of domestic small and medium-sized enterprises to the fact that, thanks to the decreasing interest rates and the government’s measures, in the case of loan contracts affected by the SME interest rate freeze, they had the opportunity to replace them with a more favorable structure – emphasized the NGM.

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