AIBIM member lenders looking at ways to help borrowers who need help with repayments if moratorium ends in September

by AFIQ AZIZ/ graphic by MZUKRI

BANKS are not agreeable on extending the automatic moratorium on loans beyond September, but will instead consider easier repayments on a case by case basis.

The automatic six-month moratorium on all bank loans was introduced in March as a part of government’s efforts to alleviate the economic impact of the coronavirus pandemic and there is a growing call for it to be extended.

However, it is understood that banks could not agree on a blanket extension.

Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) ED Ratna Sha’erah Kamaludin said member lenders are looking at ways to help borrowers who need help with repayments if the moratorium ends in September.

“For now, not all customers need or want relief. So, moving to a case by case basis helps banks to support more specifically.

“This is in the best interest of the economy as it has the better short-term and long-term outcome for both customers and banks,” she told The Malaysian Reserve (TMR) in a text reply.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said in the Dewan Rakyat yesterday that the government has not reached a decision on the loan moratorium and even indicated that it would not be extended.

Tengku Zafrul said the economy has started opening up since May, which has enabled people to go back to work and service loans.

“As such, the next steps are to have continued discussions with local banks to provide more targeted aid.

“For example, this may mean extending the loan period to reduce the instalment amount or to change terms and conditions,” he said in a response to a supplementary question.

Consumers and industries have urged the government to consider providing more time on loan servicing.

In a TMR report early this month, the Federation of Malaysian Consumers Association (Fomca) president Datuk Dr Marimuthu Nadason said individuals and businesses need at least three more months to get back on their feet and find employment as the economy slowly recovers.

Fomca said if the moratorium is not extended, more bankruptcies can be expected by the first quarter of 2021, affecting many young borrowers.

Bankruptcy among Malaysians reached 299,186 individuals as of December last year, with 84,805 people declared bankrupt from 2015 to 2019. In 2019 alone, 12,051 individuals went bankrupt, a jump of 36.8% compared to 16,482 persons in 2018.

On Monday, Federation of Malaysian Manufacturers (FMM) urged the government to grant a six-month loan extension, particularly for small and medium enterprises as well as individuals, to ease cashflow problems.

Additionally, the FMM appealed to the government for further assistance including a six-month moratorium on all short-term National Economic Recovery Plan or Penjana financing schemes, and one-year stamp duty exemptions on all loan and financing instruments starting July 1 and that the stamp duty exemptions be extended to mergers and acquisitions and partnership agreements agreed on or signed before the Covid-19 pandemic and disruptions by the Movement Control Order.

However, the banking sector is concerned that the moratorium will hit its credit rating and generate higher non-performing loans.

In April, US credit rating agency Moody’s Investors said banks in Malaysia will face a “higher risk” of asset deterioration as a result of the recently introduced six-month debt moratorium. In the event the Covid-19 pandemic is prolonged, there could be an increase in banks’ impaired loans after the moratorium ends, the agency said.

AIBIM’s Ratna agreed that banks have already been impacted by the first round of moratorium, stating that a win-win solution is needed to ensure a greater economic recovery for all sectors in the country.

“Yes, the banks (are) impacted, but the concern right now is the economy. What’s best for it and how can banks support it?

“We assure you that the banks will hear you. That is why we request for affected customers to come and discuss with banks, come forward to the banks now. This will help (us) evaluate how we can assist.”

She said each bank will have different levels of financial impact to any moratorium, but “the impact would be huge in general”.

“Depending on the size of the impact, there could be a spillover impact on depositors and overall economy.

“So, banks are focused on avoiding that to maintain overall financial stability.”

Ratna said AIBIM is still working on the data of how many borrowers would need financial assistance after the moratorium ends. The association represents some 26 banking and financing institutions around Malaysia.