Banks are working to ensure customers don't fall off a "financial cliff" at the end of the six-month loan deferment period, according to Australian Banking Association CEO, Anna Bligh.
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In response to COVID-19, Australian banks announced they would defer loan repayments for six months for those affected by the pandemic.
Ms Bligh said the banking industry was working through a number of scenarios as to what comes next after those first six months.
"They fully anticipate that they will have a large number of customers, who by that time, will be back in employment, back earning the same as they were before," Ms Bligh said.
"The best thing for those customers is to start repaying their loan as soon as they possibly can."
While banks were "acutely aware" this wouldn't be the case for everyone, Ms Bligh stressed that a lot would depend on the timing and easing of government restrictions on different sectors of the economy.
"These factors create quite a lot of uncertainty for customers, in the first instance, and for banks trying to undertake scenario planning.
"Banks are acutely aware, however, that there will be a group of customers who are either not back in employment or are back in employment but have yet to get 100 per cent of their hours back and may still be living on significantly reduced incomes.
"We are working through a range of options whereby we may be able to, hopefully, extend the deferrals in certain cases for customers who need it.
We haven't found the solution yet but we are working with regulators to provide clarity to customers as soon as possible. Nobody wants these customers to fall off a cliff.
"This (event) has never been faced on this scale by Australia's banking system and they are very aware of the potential financial hardship that some customers could face.
"Banks are equally aware that on this sort of scale whatever decisions banks make, it could have a flow-on effect into the economy and so we've got to manage this very carefully.
"So, we haven't found the solution yet but we are working with regulators to provide clarity to customers as soon as possible.
"Nobody wants these customers to fall off a cliff," Ms Bligh said.
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One of the most important roles of banks, Ms Bligh said, was to "provide an appropriate flow of affordably-priced credit into the economy".
"When we come out of COVID, we would anticipate that there will be a number of businesses, in some sectors, where opportunities have been created by this event -innovations that they'll want to invest in that will help them to grow, help them take on more staff.
"There will equally be other sectors of the economy that are going to take a lot longer to come out of this.
"Banks are making sure they remain well-capitalised so that they can lend into the economy as the gates open up because that's going to be critical for those sectors that can grow, innovate and change - we just can't afford to have them held back because they are going to be critical to the economic recovery.
"Similarly, the longer banks can provide some form of relief to customers who will still be in great need, the longer we can keep those customers from falling off a financial cliff, then that plays an active role in allowing those customers to be able to still afford their groceries, to still be consumers and all of that together helps the economy recover quicker."
Figures show that banks have also approved SME Guarantee Scheme loans for 6851 customers to a value of $1.26b.
Ms Bligh said the level of inquiry had stabilised and bank staff had been redeployed to call centres to handle the level of calls for assistance.
"I think it's absolutely critical for banks to play a very proactive role at the moment, there's no doubt we've got people experiencing unprecedented levels of financial difficulty," Ms Bligh said.
"Many of the people who are asking for help are people who have never had to ask for it, never had financial difficulty in their life, never missed a payment, never experienced any prolonged period of unemployment."
The past two months, Ms Bligh said, had demonstrated why it was so important to have a strong, stable and profitable banking system, enabling it to provide this kind of help when there was such a "big shock" to the economy.
"What we are seeing is banks as the shock absorbers in the economy and if banks weren't able to absorb the shock, then households would be absorbing it.
"And that would be an untenable situation."
