Loan Deferment

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Loan Deferment

(updated 19 July 2021)

WHAT IS LOAN DEFERMENT?

Loan deferment is when a lender is allowed to temporarily halt making payments on their principal and interest of a loan for an agreed-upon time. Initially, the loan deferment introduced by the government in April 2020 allowed lenders to make a deferment on their payments for a period of 6 months.

 

WHAT DO I NEED TO KNOW?

The Malaysian banking sector continues to step up their measures to offer relief to help borrowers adversely affected by the COVID-19 pandemic, support economic recovery and safeguard the livelihood of Malaysians.

Here are the measures that have been implemented to-date since the Movement Control Order (MCO) in March 2020:

Deferment of Loan Repayments (Blanket Moratorium)

25 March 2020 – Bank Negara Malaysia (BNM) announced a number of regulatory and supervisory measures in support of efforts by banking institutions to assist individuals, small and medium-sized enterprises (SMEs) and corporations to manage the impact of the COVID-19 outbreak. These measures allowed banking institutions to remain focused on supporting the economy during these exceptional and unprecedented circumstances, by providing flexibilities for banking institutions to respond swiftly to the needs of their borrowers. Amongst others, the deferment of all loan repayments for a period of 6 months, with effect from 1 April 2020. This offer was applicable to performing loans, denominated in Malaysian Ringgit, that had not been in arrears for more than 90 days as at 1 April 2020.

 

For credit card facilities, banking institutions offered to convert the outstanding balances into a 3-year term loan with reduced interest rates to help borrowers better manage their debt1. The deferment targeted only deserving borrowers who were challenged financially in the short-term. Thus, the blanket moratorium granted was not for those who had already defaulted before the COVID-19 impact and took advantage of the same.

In context, it was a temporary deferment or suspension of loan payment obligation (principal and interest) for a limited period of time, not a waiver. During this period, borrowers with loan that met the eligibility conditions did not need to make any payment, and no late payment charges were imposed. Borrowers, however, needed to honour the deferred payments in the future as loan/financing repayment would resume after the deferment period.

 

The blanket moratorium was meant to ease cash flows for borrowers who were affected by the COVID-19 pandemic. It was to help individuals and businesses facing financial adversities cope with challenges during this period. As was highlighted in BNM’s announcement on 25 March, borrowers were advised that interest will continue to accrue on deferred payments and they should consider this when deciding whether they wish to take up the moratorium as borrowers would need to honour the deferred repayments in the future1. Borrowers were advised to ensure that they understood and discussed with their banking institutions on the options available to resume their scheduled repayments after the deferment period.

 

Malaysia is one of the few countries in the world to implement an automatic moratorium for 6 months from April 2020 for the benefit of individuals and SMEs during the enforcement of the MCO to combat the spread of COVID-19. For Malaysia, all individuals and SME/loan financing that meet the stipulated criteria will automatically qualify for the deferment. According to Moody’s Investors Service, Malaysia offered the most extensive loan moratorium in South-East Asia, covering about 80 per cent of total loans2. Under the 20th report by the Economic Stimulus Implementation & Coordination Unit Between National Agencies (LAKSANA), Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said that a total of 732,000 borrowers who took the automatic moratorium have resumed their monthly loan repayment instalments and under the 24th LAKSANA report he said that the value of the moratorium as of 25 September 2020 is estimated at RM97.26 billion. Out of this figure, a total of RM34.04 billion was utilised by the business sector while RM63.22 billion was utilised by the Rakyat3. Overall, the moratorium benefited more than 7.7 million Malaysians, comprising 93 per cent of individual borrowers as well as 243,000 businesses or 95 per cent SMEs4.

  

1https://www.bnm.gov.my/-/measures-to-assist-individuals-smes-and-corporates-affected-by-covid-19

2https://www.thestar.com.my/business/business-news/2020/07/18/honeymoon-over-for-borrowers

3https://pre2020.treasury.gov.my/

4https://www.parlimen.gov.my/files/hindex/pdf/DR-27072020.pdf

Targeted Repayment Assistance
Enhanced Targeted Repayment Assistance
Opt In Moratorium

WHAT OTHER MEASURES HAVE BEEN TAKEN?

Apart from the measures and assistance being provided by the banking institutions, there are various other initiatives made by the Malaysian government, BNM and other industries to aid those who are financially affected by the COVID-19 pandemic.

PRIHATIN and PENJANA Economic Stimulus Package

The initial assistance given were the PRIHATIN and PENJANA economic stimulus package amounting to RM295 billion1 by the Malaysian government.

The Prime Minister had on 5 June 2020 announced that measures under PRIHATIN Rakyat Economic Stimulus Package have saved over 2.4 million jobs, while over 10 million people received assistance to ease their cash flow burden, and over 300,000 companies supported. Under PRIHATIN, RM7 billion in financing to help SMEs was provided through BNM and financial institutions. These include the following2:-

  • Special Relief Facility (SRF);
  • Agrofood Facility (AF);
  • Automation and Digitalisation Facility (ADF); as well as
  • Micro credit schemes.

Additionally, the Ministry of Tourism, Arts and Culture (MoTAC) had on 30 July 2020 announced the PENJANA Tourism Financing (PTF) Scheme to aid the tourism sector. According to the ABM’s press release dated 6 August 2020, the PTF which is offered by 12 participating banks in Malaysia, is aimed at supporting Malaysian micro, small and medium enterprises (MSMEs) in the tourism sector by preserving their capacity and assisting them to adjust and remain viable post COVID-19, can be utilised for working capital and capital expenditure to enhance their business models and deploy new practices3. Minister of MOTAC, Datuk Seri Nancy Shukri has urged tourism players to apply for the PTF worth RM1 billion to remain competitive in the new normal during the COVID-19 pandemic4. To support the tourism sector until 30 June 2021, service tax exemptions for hotels that have been utilised by accommodation premises operators has reached a value of RM1.37 billion. Other initiatives to support the tourism sector include individual income tax relief of up to RM1,000 on travel expenses, as well as full tourism tax exemption5. As of 2 July 2021, there were 672 applications for PTF, of which 332 applications had been approved with a total financing of RM66.1 million6.

As of 3 November 2020, a total of RM9.86 million people have benefited from RM4.5 billion channelled under the Bantuan Prihatin Nasional (BPN) 2.0, which includes 7 million from the B40 group and 2.86 million recipients from the M40 group7.

On 9 December 2020, Finance Minister said that various government agencies will continue to provide soft loans and grants, including through Budget 2021, to ensure that SMEs receive support, operate smoothly and grow. The government hopes that all this support will enable the SMEs to compete in the medium and long terms. Tengku Zafrul highlighted that about 1.4 million SMEs and micro-SMEs have already benefitted from the various assistance amounting to over RM24 billion under the stimulus packages8.

On 14 January 2021, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said that the government has disbursed a total of RM1.149 billion in financing to SMEs as of 1 January 2021, under the short-term National Economic Recovery Plan (PENJANA)9.

On 18 January 2021, Prime Minister Tan Sri Muhyiddin Yassin announced the "Perlindungan Ekonomi dan Rakyat Malaysia" (PERMAI) assistance package worth RM15 billion. In a special address, Prime Minister said a total of 22 initiatives will be implemented under PERMAI, anchored on three main objectives namely - Combating the Covid-19 outbreak, safeguarding the welfare of the people, and supporting the business continuity10.

BNM in its press release dated 17 March 2021 announced that an additional allocation of RM700 million has been provided for the SME ADF, bringing the facility’s total size to RM1 billion. The ADF, which was established in March 2020, aims to encourage SMEs across sectors to automate processes and digitalise operations to increase productivity and efficiency. The facility will be available until 31 December 2021 or full utilisation, whichever is earlier11.

For the SME Soft Loans Funds administered by BNM as at 2 July 2021, the total approved applications by local banks and accepted by SMEs is RM12.18 billion, which will benefit 25,772 SMEs; amount includes SRF (which has been fully utilized by 21,000 SMEs and has helped save over 400,000 jobs12), ADF, All-Economic Sector Facility and AF funds6. In supporting business continuity the TEKUN Business Recovery Scheme (TBRS), specifically for Micro SMEs has benefited 14,946 micro businesses, fully utilizing its RM100 million fund6. The government's allocation of RM2 billion under PENJANA SME Financing which prioritises SMEs that have never obtained any bank loans before has also disbursed as at  21 May 2021, a total of RM1.403 billion in financing to small and medium enterprises (SMEs) benefitting 7,497applicants13

1https://www.thestar.com.my/news/nation/2020/08/06/ministry-studying-efficacy-of-stimulus-measures
2https://www.thestar.com.my/news/nation/2020/06/05/pm-unveils-short-term-recovery-plan-to-boost-economy 
3https://www.abm.org.my/media-room/press-releases/item/336-joint-press-release-by-abm-adfim-and-aibim-penjana-tourism-financing-for-smes-and-micro-enterprises-open-for-application-at-participating-banks
4https://pre2020.treasury.gov.my/flipbook/laksana15/
5https://pre2020.treasury.gov.my/pdf/Teks-Ucapan-Laporan-LAKSANA-PRIHATIN-44.pdf
6https://www.mof.gov.my/pdf/laporan-laksana/laksana-61-en/
7https://pre2020.treasury.gov.my/pdf/Teks-Ucapan-Laporan-LAKSANA-PRIHATIN-28.pdf
8https://themalaysianreserve.com/2020/12/10/tengku-zafrul-loans-grants-for-smes-to-continue/
9https://pre2020.treasury.gov.my/pdf/Teks-Ucapan-Laporan-LAKSANA-PRIHATIN-36.pdf
10https://www.pmo.gov.my/2021/01/special-announcement-on-the-perlindungan-ekonomi-rakyat-malaysia-permai-assistance-package/
11https://www.bnm.gov.my/-/additional-allocation-rm700-million-sme-adf
12https://pre2020.treasury.gov.my/pdf/Teks-Ucapan-Laporan-LAKSANA-PRIHATIN-19.pdf
13https://pre2020.treasury.gov.my/flipbook/laksana55/

PEMERKASA (Strategic Programme to Empower the People and Economy)
PEMULIH (National People’s Wellbeing and Economic Recovery Package)
BNM and Other Industry Measures

HOW HAVE OTHER REGIONS BEEN IMPACTED?

Financial institutions (FIs) worldwide including Malaysia have been proactive in responding to the needs of their borrowers with various rescheduling and restructuring initiatives offered to assist affected borrowers. Such efforts are highly commended and encouraged to continue. These assistances would be subject to independent assessment by the banks on a case-to-case basis. The deferment package arising from the COVID-19 pandemic in Malaysia has been an extension of these measures across all FIs to widen access to short-term financial relief by households and businesses that need it the most in these challenging times.

In other countries, certain conditions have to be met first in order for the borrowers to qualify for the moratorium amid the coronavirus (COVID-19) crisis and a period of 6 months loan deferment is typical e.g. countries such as Australia, New Zealand and India have also granted 6 months loan deferment. BNP Paribas Asset Management Malaysia Sdn Bhd Chief Executive Officer (CEO) and Country Head, Angelia Chin-Sharpe said compared with regional peers, moratorium support offered by Thailand’s banks only covered 33 per cent of the country’s total loan book, followed by the Philippines (22 per cent), Indonesia (16 per cent), India (11 per cent) and Singapore (10 per cent) while Malaysian banks are the most committed to helping businesses and individuals wade through the COVID-19 crisis with up to 55 per cent of the total loan book for banks in the country are under moratorium1.

Despite the various measures offered, it is worth to note that according to Maybank Kim Eng Research, loan moratoriums and restructuring pose critical risks to the banking systems in ASEAN including Malaysia and need to be watched going forward because even if 10% of such loans are going bad, this could have a material impact on non-performing loans (NPLs) especially in Indonesia, Thailand and Malaysia, as well as in Singapore and the Philippines. As part of extraordinary Covid-19 relief measures, many regional banking systems have placed loans on moratoriums where interest and/or principal payments are paused. These loans are not classified as NPLs, hence leads to a shadow asset quality risk and muddied the waters on asset quality risks. The research house reiterated that this is a critical risk that needs to be closely watched2.

 

World Map of Debt or Contract Relief Measures

The map below serves as a guide to the debt or contract relief measures made by governments around the world during the COVID- 19 pandemic. While the visual representation is not limited specifically to loan deferment assistance, it is a useful indicator in seeing the broad fiscal and financial measures made by governments in response to the pandemic. As at 8 July 2021, Malaysia remains one of the countries that continue to provide broad relief measures to the public

According to a report made by the Unit for the Implementation and Coordination of National Agencies on the Economic Stimulus Package (Laksana), Malaysia’s Covid-19 stimulus packages contributed 20 per cent to the country’s gross domestic product (GDP), comparable to other developed countries and higher than regional developing countries.

The analysis compared Malaysia against countries in the Asia Pacific region (Indonesia, Philippines, Singapore, Thailand, Vietnam, Australia, New Zealand, China, Taiwan, South Korea) and the United Kingdom and United States of America. It reported that in the US, the stimulus packages contributed 26.5 per cent to GDP, New Zealand 19.3 per cent, Australia 19.1 per cent and the UK 17.8 per cent. As for the Asian region, it reported that Malaysia is on par with Singapore at 20 per cent as well, while other countries such as China, Thailand, Vietnam and Taiwan contributed below 10 per cent to their GDP1.

1https://www.malaymail.com/news/malaysia/2021/07/18/malaysias-covid-19-stimulus-packages-on-par-with-those-in-developed-countri/1990809 


A Quick Reference Guide on the Loan Deferment Assistance Offered in Other Countries

The table below provides a collective overview of the different types of loan deferment assistance provided in other countries to aid individuals and business owners in mitigating the financial impact of the coronavirus pandemic. Many countries around the world provided similar assistance to that offered in Malaysia, however, unlike Malaysia the assistance that was provided before in these countries were deemed sufficient and most are no longer available at the time of writing.

The areas highlighted in grey are countries where the provision of financial assistance and aid is no longer available.

 

 

Australia

Similar to banks in Malaysia, banks in Australia have urged their borrowers to talk to their bank(s) if they are still struggling with finances, and not to wait further. CEO Anna Bligh of the Australian Banking Association (ABA) also added that banks are there to lend money into the economy but they are also there to make sure that they lend that money with the appropriate degree of risk and the ability to manage that risk. This is important because the banks are lending the customer’s money, the money out of customer’s deposit account1.

In an interview on Money News with ABA CEO Anna Bligh on 11 March 2021, she explained  that customers continue to come off deferrals and that out of six million people in Australia that have a mortgage,1% of them are experiencing some form of arrears. Anna Bligh reiterated that right at the height of COVID, when things were at their absolute worst, only 10% of Australian mortgage holders deferred the payments on those mortgages. 90% of those people are now back paying in full2.

ABA has stated in an announcement on 8 July 2021 that a national support package will be available to all small businesses and home loan customers significantly impacted by current lockdowns or recovery from recent lockdowns, irrespective of geography or industry. On application, this support also includes business banking  repayment deferrals and home loan support3.

 

1https://www.ausbanking.org.au/news-resources/

2https://www.ausbanking.org.au/customers-continue-to-come-off-deferrals/

3https://www.ausbanking.org.au/australian-banks-offer-covid-19-customer-relief/

New Zealand
Singapore
Thailand
United Kingdom

HOW ARE BANKS IMPACTED?

According to a Joint IMF-World Bank Staff Position Note with an overview of measures taken across jurisdictions to date, in order to alleviate further operational pressure and burden on banks, many authorities have revised their enforcement approaches by putting on hold or postponed non-critical reporting and/or stress testing exercise1. However, banks are still required to implement enhanced credit monitoring approaches so that market discipline continues to play its critical role. Authorities have also recognized and exerted efforts to reduce moral hazard to promote transparency and risk disclosures by:

  • making the measures time bound
  • clearly defining the sectors and loans who are able to access these measures
  • requiring additional reporting to facilitate banks in monitoring and assessment of the impact of the measures

By granting the moratorium, banks' liquidity coverage ratio (LCR) will decline more significantly as banks would still require working capital to continue paying for interest expense, meet deposit withdrawals, debt repayments and sustain its overheads. The loan deferment would also impact upon the banks’ cashflow as payments from their borrowers will not be forthcoming until 6 months later. However, if borrowers continue to face repayment/payment constraints after the 6 months blanket moratorium expires, higher default rates will start to show up on banks’ balance sheets and will be reflected as higher impaired loan provisions or credit cost.

In the Malaysia context, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the banking sector is estimated to see losses of RM6.4 billion during the loan moratorium period, between April and September i.e. losses of approximately RM1.06 billion per month based on Malaysian Financial Reporting Standards (MFRS) 9. According to the Finance Minister, over the six-month blanket moratorium period, banks could incur RM79 billion loss in capacity to provide loans, otherwise known as “modification loss”2. “Modification loss” is the reduction in the banks’ capacity to disburse new loans worth RM79 billion to the borrowers i.e. individuals and businesses. This amount is the total that banks can lend individuals and businesses in a normal business situation over the six-month period.

According to BNM’s Financial Stability Review for First Half 2020, banks reported a marked decline in earnings from domestic banking activities during the first half of the year, weighed down by further margin compression and higher provision for credit losses. On a positive note, significant relief measures introduced have kept business loan impairment ratios low and stable at 2.5 per cent for overall non-financial corporates. Households continue to maintain comfortable levels of financial assets and liquid financial assets at 2.2 times and 1.4 times of debt, respectively, as relief measures introduced by the government and banks released extra cash to households. Business conditions are expected to improve in the second half of the year, in line with the gradual improvement in economic activity. The extension of targeted financial relief measures will continue to help support businesses alongside corporate and SMEs guarantee schemes as the recovery takes a stronger hold. Based on BNM’s statistics, since July, the number of businesses receiving repayment assistance from banks has increased seven-fold. In the first half of 2020, the banking system as a whole disbursed a total of RM120 billion in lending and financing to the SMEs with more accounts being approved in 2020 compared to the same period in previous years. BNM also revealed in its report that the local banks’ credit cost could rise to RM29 billion in 2020 and 2021 on the back of higher projected loan impairments3.

Overall, the local banking industry has experienced an extremely challenging year in 2020 as many banks are posting weaker performance to, among others, lower net interest income, significantly higher allowance for impaired loans amid a Covid-19 pandemic driven weaker economic outlook and the automatic loan modification loss.

According to BNM’s Governor Datuk Nor Shamsiah Mohd Yunus during the release of Malaysia’s fourth quarter gross domestic product results, for the first time since the COVID-19 outbreak, banks in Malaysia have been more willing to lend as the appetite for loans improved across household and businesses4. In the final quarter of 2020, business loan disbursements rose to RM206.2 billion, exceeding the 2017-2019 quarterly average of RM196.7 billion5.

In its base case, S&P Global Ratings expects that most banks in Asia-Pacific would absorb the hits from COVID-19, and start to recover by the end of 2021. Nevertheless, a more severe or prolonged hit to the economies than the current baseline would almost certainly push banks’ credit losses higher, drive their earnings lower and amplify other risks6. In a report on 6 Oct, Moody’s said it expect asset quality to deteriorate significantly in Asia-Pacific as economic conditions remain weak, while profitability will take a hit from rising credit costs and declining margins7.

According to Fitch Ratings report dated 7 January 2021, rating outlooks had turned negative for banks in most jurisdictions this year compared to 2020. This reflected downside risks to its baseline scenario from a potentially sluggish economic recovery following sharp deterioration in 2020 owing to the pandemic. Fitch said the rating outlook for Malaysian banks was "negative", while the sector outlook was "stable". The key issues for Malaysian banks were slow non-performing loan recognition, lower profitability and property market risks, it added8.

Analysts and economists said that the banks’ gross impaired loans (GIL) could weigh on the banking sector as how the asset quality of banks would evolve will depend on the duration of the MCO 2.0 that is implemented by the government beginning 13 January 2021 to curb the pandemic. Rising GILs have always been the key risk factor under the present scenario, as this ratio has been inching upwards from 1.38% in September 2020 to 1.41% and 1.53% in October and November 2020 respectively9.

It is important to understand that banks’ primary role is to take in funds (in the form of deposits and shareholdings in the banks) from depositors, pool them, and lend them to those who need funds. In simple words, banks are intermediaries between depositors (who lend money to the bank) and borrowers (to whom the bank lends money). Ultimately it is our money in the form of deposits and our money in the form of shareholdings in the banks that is used to match up the creditors and borrowers. The performance of the credit sector plays an important role as a catalyst for economic growth today. Therefore, when the buffers deplete and loan demand weakens, banks would not be able to declare dividends as they will rely on retaining their earnings to strengthen their capital. With no dividends to be declared by the banks, it is not only the Top 20 per cent (T20) of the Malaysian population who will be affected, but Malaysians in general as well, who would receive less or even no benefits from their deposits which are in unit trust funds.

In an article written by Datuk Abdul Farid Alias, Chairman of ABM, he explained that it was important for banks to remain financially sound as the profits made are retained as capital for lending and dividends to shareholders. A significant percentage of the banks’ equity are held by Malaysian institutional investors, hence,  the profits made by these investors flow back to the public in the form of dividends for the people  who depend on sustainable returns from these investments for their financial needs and retirement years (for example, ASB unit holders, EPF and Tabung Haji members and government pensioners). As for capital, he stated that if a bank is unable to grow its capital, it may have to slow down or even stop giving new loans. Banks need to be able to grow its capital to enable banks to give out loans in order to help the country to recover faster10

With the announcement of another loan moratorium on 28 June 2021,  the recognition of non-performing loans (NPL) into 2022 will be further delayed and may lengthen the time needed for banks' credit costs and profitability to revert to normal. According to Fitch Ratings their initial  revised projection of the banking system's NPL ratio to rise only marginally by end-2021, from 1.6 per cent as of May 2021, is now expected to peak at below 2.5 per cent.  The credit rating agency went on to explain that reduced visibility into customers' financial health and repayment behaviour may also give rise to heightened caution among banks and lower their appetite for loan growth11.

1https://www.bnm.gov.my/documents/20124/2294076/4Q2020_GDP_Slides.pdf 
2https://www.parlimen.gov.my/files/hindex/pdf/DR-27072020.pdf
3https://www.thestar.com.my/business/business-news/2020/07/20/banks-likely-to-be-spared-from-rating-downgrade
4http://www.nama.com.my/PRINT_NEWS/2020/10/26/20201026_N60_EDG_CR_18_FC_MALAYSIAS~PROBLEM~LOANS~EXPECTED~TO~RISE~BUT~NOT~AS~BAD~AS~REGIONAL~LENDERS.JPG
5https://www.nst.com.my/business/2021/01/655198/banks-asset-quality-still-concern-capital-strength-key-recovering-factor
6https://www.thestar.com.my/business/business-news/2021/01/25/all-eyes-on-banks-asset-quality
7https://www.bnm.gov.my/-/transfer-of-the-small-debt-resolution-scheme-to-agensi-kaunseling-dan-pengurusan-kredit-akpk-
8https://www.bernama.com/en/business/news.php?id=1939635
9https://www.thestar.com.my/business/business-news/2021/01/25/all-eyes-on-banks-asset-quality
10https://www.abm.org.my/media-room/press-releases/item/1122-targeted-moratorium-is-best-solution-for-country
11https://www.nst.com.my/business/2021/07/703969/malaysias-moratorium-flatten-peak-npls-delay-profit-recovery-fitch 


CONCLUSION

For borrowers who are able to start repayments, this would be in their interest as resuming repayments would reduce the borrowers’ overall cost of borrowings. Any loan forbearance will still assume an eventual full repayment of arrears.

Borrowers are reminded that the decision made from the beginning to apply and obtain bank loans marks a specified term of commitment and represents a significant financial obligation for an individual or a particular business. Therefore, rigorous financial planning and the availability of sound financial buffers against unexpected events are critical.

Alternatively, borrowers can also approach the relevant “one-stop” centre to work out an appropriate assistance package i.e. AKPK for individuals and Small Debt Resolution Scheme (SDRS) for SMEs (effective 1 September 2020, BNM has transferred the SDRS function to AKPK to help SMEs, including micro SMEs1). As at 31 January 2021, AKPK has helped 32,349 people to fully settle their debts totalling RM1.5 billion via its debt management programme (DMP). According to AKPK’s Chief Executive Officer Encik Azaddin Ngah Tasir, since AKPK’s inception in 2006, the agency had extended its financial advisory services to over 1.2 million people. He also said that in 2020 alone, AKPK has helped 33,356 individuals to restructure their debts and place them on stronger footing, giving them clarity and direction in laying out their financial plans. As for SMEs, 161 applications were approved by the agency for debt restructuring services with loan amounts totalling RM 151.8 million from September 2020 to February 20212.

Agensi Kaunseling dan Pengurusan Kredit (AKPK) stands ready to provide the necessary advice and guidance to both individual borrowers/customers and SMEs, including options for debt restructuring.  In addition to contacting the banks, SMEs can also request for assistance through AKPK’s dedicated SME Help Desk at: akpk.org.my/smehelpdesk or akpk.org.my/my/mejabantuanpks. The virtual helpdesk provides free financial advice and facilitates applications for repayment assistance.

The government’s decision to re-introduce a comprehensive loan moratorium on 28 June 2021 a second time after its debut in March of last year is a temporary measure and part of the National Recovery Plan (NRP) initiative3. The loan moratorium offered is suitable for those individuals who have lost their jobs, taken major paycuts or in dire need of cash flow. It is not advisable to use the money meant for loan repayment for short term equity investments. Financial Planning Association of Malaysia CEO Linnet Lee cautioned Malaysians against doing this as unlike last year, this time around market conditions are very soft and there remains uncertainty on how long the movement restrictions may last4.

In a press release made by BNM dated 6 July 2021, they advised that borrowers opting for repayment assistance will increase their overall cost of borrowing, as interest/profit will continue to accrue on deferred payments. BNM also added that where a borrower requests to maintain lower instalments (instead of original instalments) after the moratorium, this would result in the loan tenure being extended for a longer period. Banks, however, will not charge interest on interest, or profit on profit (i.e. compounding interest/profit), or any penalty interest/profit during the period of assistance5.

Recently, there have been reports that fraud and scam cases in the country are getting more rampant. In this regard, members of the public and businesses are advised to be cautious against fraud syndicates which deploy scam tactics with the intention to deceive unsuspecting victims that may result in monetary losses as well as risk compromising their sensitive banking details and confidential information. Members of the public and businesses seeking repayment assistance from banks must get in touch with the banks directly in order to avoid being deceived by these unscrupulous syndicates/ fraudsters.

1https://www.bnm.gov.my/-/transfer-of-the-small-debt-resolution-scheme-to-agensi-kaunseling-dan-pengurusan-kredit-akpk-
2https://www.bernama.com/en/business/news.php?id=1939635
3https://www.mof.gov.my/en/news/press-citations/tengku-zafrul-pemulih-moratorium-estimated-at-rm80-bln-malaysia-only-country-implementing-it-for-second-time
4https://www.thestar.com.my/business/business-news/2021/07/02/guidelines-set-for-loan-halt-programme
5https://www.bnm.gov.my/-/six-mth-mora-begins-20210707 

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