Hungary eases repayment rules for some loans under moratorium

BUDAPEST (Reuters) - Hungary's government has eased repayment rules for retail credit card loans and overdraft credit as part of an extended debt moratorium, the latest in a string of gifts for households ahead of next year's election.

Prime Minister Viktor Orban's government decided on Monday to extend the moratorium, in place since March 2020, for some vulnerable groups until mid-2022.

The scheme will be extended for pensioners, families with or expecting children, public works scheme employees, and borrowers whose income has declined from last year.

Facing the prospect of a tight election, Orban has showered the electorate with handouts, including a planned $2 billion income tax rebate for families, scrapping income tax for young workers, home renovation grants and extra pension payments.

Under the terms of a government decree published late on Wednesday, Hungary's banks will have to recalculate retail credit card loans and overdraft credit to apply lower interest rates stipulated as part of the moratorium.

Financial news website portfolio.hu said the measure could affect over 500,000 borrowers, costing banks between 20 billion to 30 billion forints ($68 million to $102 million) as the loans are recalculated with a maximum interest rate of about 12% applied to consumer loans.

Lenders will have 60 days to make good on any repayments owed to borrowers. The local banking sector earned a net profit of 405 billion forints ($1.37 billion) in the first half.

A spokeswoman for the Hungarian Banking Association declined immediate comment. Press officials at OTP Bank, Hungary's top lender, did not immediately respond to emailed questions for comment.

At 0828 GMT, OTP shares traded 0.3% higher at 18,350 forints, broadly in line with the blue chip index. OTP shares have gained 34% over the past six months, outperforming the wider market, which rose by 18% over the same period.

($1 = 295.47 forints)

(Reporting by Gergely Szakacs; Editing by Edwina Gibbs)