Banks offer non-compounding interest, profit rates for customers


SEVERAL local banks are offering non-compounding interest and profit rates to its customers during the six months moratorium period.

This comes after Bank Negara Malaysia’s (BNM) announcement on a deferment of loan and financing repayment for up to six months to individuals and small and medium enterprises (SMEs) effective April 1, to assist borrowers while the country battles Covid-19.

The central bank recently said the deferment is applicable to performing loans that have not been in arrears for more than 90 days as at April 1, and denominated in ringgit.

RHB Banking Group said it will not be compounding interest during the six months repayment deferment for banking facilities that was announced by BNM on March 25, 2020.

“This will, however, be applicable to retail and SME customers only and will take effect from April 1. For Islamic financing, RHB will continue to observe the principle of no compounding of profit.

“The moratorium will apply automatically to all RHB Bank Bhd, RHB Islamic Retail and SME customers, with the exception of loans/financing facilities that are in arrears exceeding 90 days as at April 1, 2020,” it said.

For credit card related facilities, RHB customers may request to convert the outstanding balances into a three-year term loan with reduced interest rates.

Public Bank Bhd said the bank is providing a six-month moratorium for monthly instalment payments of loans for all eligible individuals and business customers, with no compounded interest during the deferment period from April 1, 2020 to Sept 30, 2020.

“For Islamic financing, profit will continue to accrue on the outstanding principal amount. Such profit will not be compounded as well, in line with Shariah principles.

Public Bank MD Tan Sri Tay Ah Lek said following BNM’s announcement the bank further extends the relief assistance to its customers by not charging any compounding interest on the interest that accrues during the moratorium period.

Meanwhile, CIMB Bank Bhd and CIMB Islamic Bank Bhd said all individual and SME customers will be automatically enrolled for a moratorium on loan/financing repayments for the six months deferment period.

CIMB Bank said the moratorium is applicable to all ringgit-denominated loans/financings held by eligible customers that have not been in arrears for more than 90 days as at April 1.

“For individual customers, eligible Islamic and conventional products under this moratorium include ASB financing, home financing, auto financing, personal financing (express cash, cash plus loan and awam-i) and for SME customers, the moratorium applies to all existing term loans/financing and industrial hire purchase.

“Interest/profit will continue to accrue on loan/financing repayments that are deferred, and customers will need to honour the deferred repayments in the future.

Interest on conventional loans will not be compounded during the moratorium period.

“For Islamic financing, the profit will continue to be accrued during the moratorium period. Profit will not be compounded in line with Shariah principles. Loan/financing repayment resumes after the moratorium,” it said.

CIMB Bank noted that individual customers may choose to opt-out of the moratorium should they wish to continue with their existing schedule, while credit card customers may opt-in to convert their card balances to a term loan/ financing at 13% per annum and up to a tenure of three years.

Affin Bank Bhd and Affin Islamic Bank Bhd said they will offer their retail customers and SME clients non-compounding interests or profit for six months, for term loan and term financing during the six months moratorium.

“In line with BNM’s guidelines, retail and SME customers of both banking entities will be enrolled into the moratorium automatically.

“For all Islamic Financing facilities under Affin Islamic, profit rates are already not compounded in line with Shariah principles,” it said.

OCBC Bank (M) Bhd and its subsidiary OCBC Al-Amin Bank Bhd said they too will not be compounding interest and profit respectively for mortgages and SME loans/financing during the moratorium period.

“This means, these customers will not be charged any interest on the interest that arises from the moratorium period,” it said.

OCBC Bank CEO Datuk Ong Eng Bin said this would apply to both mortgage and SME customers. “These are both trying and uncertain times. So we are seeking to alleviate our customers’ burdens as much as we can.

“Although compounding might be allowed for, we have elected not to do so in light of the pressing circumstances. We hope our customers will continue to exercise prudence in their spending during these challenging times,” he said.