TO:    
WHEREAS, under Letter of Instructions No. 490, uncollected Masagana 99 accounts undergoing court action are directed to be excluded from the computation of total past due obligations of rural banks to the Central Bank, so that, in the interim, banks with large amounts of arrearages can avail of CB rediscounting facilities and can, therefore, continue lending to deserving borrowers;

WHEREAS, the liberal credit policy effected through exclusion under LOI No. 490 of Masagana 99 loans-in-from the computation of total past due obligations of rural banks to the Central Bank has instead exacerbated the incidences of loan delinquencies, encouraged abuses of the re-discounting privilege, and even unduly subjected agrarian reform farmers visited by natural calamities to unnecessary court action;

WHEREAS, in order to insure the viability and credibility of the Masagana 99 supervised credit program, there is an imperative need to eradicate such irregularities in the operation of rural banks;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order the Central Bank to include the uncollected Masagana 99 accounts undergoing court action in the computation of total past due obligations of rural banks to the Central Bank as well as in the commutation of past due ratios in the total loan portfolio of rural banks.

The provisions of Letter of Instructions No. 490 inconsistent herewith are hereby repealed or modified accordingly, and the institutions concerned in LOI No. 490 are hereby instructed to adept such measures as are necessary and appropriate to implement a no achieve the objectives of these instructions.

This Letter of Instructions shall take effect immediately.

DONE in the City of Manila, this 25th day of June, nineteen hundred and eighty-one.