Italian banks give businesses more time to pay back loans

ROME (Reuters) - Small businesses in Italy will get more time to repay and service loans they are struggling with because of the country's weak economy under a new agreement from Italian banking association ABI.

The new deal with ten business associations extends a 2012 agreement to relieve companies that was due to expire in September this year. It also provides for a new accord to come into effect at that time.

The pact allows businesses to apply to banks to suspend loan payments and extend repayment plans. ABI said as of May, the 2012 agreement had freed up 4.1 billion euro ($5.33 billion) for investment that companies would otherwise have spent servicing their debt.

"These measures, notwithstanding the daily difficulties suffered by both banks and businesses, are a concrete aid to give oxygen to small and medium enterprises," ABI President Antonio Patuelli said in a statement on Monday.

Under ABI's 2012 agreement, 95,000 loans with a total of 29.5 billion euros in repayments outstanding were suspended. This was in addition to 260,000 loans with 70 billion euros in outstanding repayments that were suspended under an agreement that expired in 2011.

The Bank of Italy said last month bad debts at Italian banks rose to 133.3 billion euros in April, their highest level since records began in June 1998, exacerbating a credit crunch in the euro zone's third largest economy.

($1 = 0.7693 euros)

(Reporting by Naomi O'Leary. Editing by Jane Merriman)