Banks face RM79b economic loss from loan moratorium

pic by MUHD AMIN NAHARUL

FINANCE Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz (picture)  estimated that banks could risk economic loss of RM79 billion over the six-month moratorium period.

He said the banking sector is suffering RM1.06 billion losses per month and by the time the moratorium period ends in September, the banks would suffer a loss of RM6.4 billion collectively.

“The banking sector is estimated to suffer the Malaysian Financial Reporting Standards (MFRS) losses of RM1.06 billion for every month the moratorium is in place.

“In total, the losses will be about RM6.4 billion, equivalent to the reduction of banks’ capacity to provide new loans to borrowers,” he told the Dewan Rakyat yesterday.

Tengku Zafrul was responding to a supplementary question from Lim Guan Eng (Pakatan Harapan-Bagan) who asked on the losses suffered by the banking sector following the introduction of the moratorium period.

Lim also asked if there are intentions to extend the loan repayment moratorium for another six months, to which the banker-turned-minister said a decision would be announced soon.

“With regards to the discussions with Bank Negara Malaysia and the banking sector on the way forward, they (banks) have committed to continue assisting the rakyat and businesses that need help in this trying time,” Tengku Zafrul added.

He also said the government will continue to monitor the situation and the latest developments, and will take the necessary action as has been done previously, to ensure the people continue to be protected if the Movement Control Order period is extended.

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

“A total of 7.7 million individual borrowers or 93%, and over 245,000 small and medium enterprises (SMEs) or 95%, had benefitted from the six-month moratorium which was implemented on April 1,” he said.

A month after the implementation, on May 6, 2020, the Finance Ministry also announced that the government has reached an agreement with the banking industry to not impose additional charges on the instalment of the hire purchase agreement (conventional and Shariah).

Borrowers would only need to resume instalment payments based on the terms of agreement with the respective banks, including an additional six months for the entire financing schedule they went for the moratorium.

“Malaysia is the only country which executes the moratorium automatically for six months for the benefit of the people and businesses.

“Although the moratorium does not cover credit card holders’ debts, for those facing financial difficulties, the bank has offered to convert outstanding credit card balances into term loans for up to three years with lower interest rates than normal credit card rates,” Tengku Zafrul said.

“To date, banks have contacted more than 394,000 borrowers to offer restructuring and rescheduling, out of which 75,000 are SME borrowers,” he added.

Overall, for the first six months of 2020, more than 21,000 borrowers have been assisted under the loan repayment plan compared to only about 14,000 borrowers who were assisted in the whole of 2019.

 

Editor’s note: Changes have been made to headline and this article to reflect the facts accurately