It’s an automatic deferment applicable to conventional loans or Islamic financing repayment obligations, except credit cards
by ASILA JALIL / pic by MUHD AMIN NAHARUL
BANK Negara Malaysia (BNM) has granted a deferment of loan and financing repayment for up to six months to individuals and small and medium enterprises effective April 1, to assist borrowers while the country battles the coronavirus pandemic.
The central bank said it is an automatic deferment applicable to conventional loans or Islamic financing repayment obligations, except credit cards, that have not been in arrears more than 90 days as at April 1, 2020, and are denominated in ringgit.
Banking institutions will provide conversion of credit card outstanding balances into a three-year term loan with reduced interest rates to assist borrowers.
“It is important to note that the interest/profit will continue to accrue on loan or financing repayments that are deferred, and borrowers will need to honour the deferred repayments in the future.
“Borrowers should, therefore, ensure that they understand and discuss with their banking institutions on the options available to resume their scheduled repayments after the deferment period,” BNM said in a statement yesterday.
Corporations are also allowed to discuss with their lenders to defer or restructure their loans. The move, the central bank said, would enable corporations to preserve jobs and resume economic activities when the conditions improve.
“The central bank has provided appropriate time-bound flexibilities for banking institutions to report deferred/restructured facilities in the Central Credit Reference Information System, or CCRIS, taking into account the temporary nature of disruptions faced by borrowers/customers,” it said.
BNM stressed that the banking system remains resilient and has enough liquidity to sustain the country’s financial need despite the reduction of the Statutory Reserve Requirement (SRR) by 100 basis points (bps).
It said the recent SRR reduction has released approximately RM30 billion worth of liquidity into the banking system on top of the excess liquidity estimated at RM160 billion.
MIDF Amanah Investment Bank Bhd senior analyst Imran Yassin Mohd Yusof said the measures announced by BNM aim to give respite to current borrowers and encourage lending.
By providing relief to borrowers, the measure indirectly ensures that asset quality of banks remains stable. Imran Yassin said this also encourages lending activities as banks do not have to worry about delinquencies and impairment affecting their profit and loss, as well as capital.
As interest accrues during the deferment period, which translates to borrowers having to pay slightly higher, Imran Yassin said the respite is necessary to help borrowers with cashflow during this difficult time.
“The alternative would be for the borrowers to default on their loans and this could have repercussions in terms of future credit worthiness among others,” he told The Malaysian Reserve yesterday.