Around 480,000 individuals and 34,400 SMEs get repayment aid

Banking institutions will continue to provide more targeted repayment assistance upon request by borrowers


BANKING institutions have facilitated requests for repayment assistance for about 480,000 individuals and 34,400 small and medium enterprises (SMEs) in sectors affected by the Covid-19 pandemic following the end of the six-month blanket loan moratorium enforced in April.

Bank Negara Malaysia (BNM) said yesterday that at the beginning of the moratorium, more than 95% of individual and SME borrowers took up the automatic repayment deferment.

As of Sept 25, around 840,000 individuals and SME borrowers have opted out or resumed repayments, in line with the improved economic conditions, it said.

“This number is expected to increase further following the end of the automatic repayment deferment. For those who still face difficulties to resume repayments, banking institutions will continue to provide more targeted repayment assistance upon request by borrowers.

“To date, banking institutions have facilitated requests for repayment assistance of close to 480,000 individuals and 34,400 SMEs in Covid-19-affected sectors,” BNM said in its report titled “Financial Stability Review for First Half of 2020”.

The targeted repayment assistance includes an additional three months deferment of loan or financing repayments for unemployed borrowers, as well as proportionate reduction of loan or financing repayments for borrowers with reduced income.

It said the number of borrowers who require an extended period of repayment assistance may still be large which calls for banking institutions to ensure they allocate appropriate resources and management attention to repayment assistance efforts.

Based on the macro stress test conducted by the central bank, overall impairments are projected to rise above 4% of loans by end-2021, mainly driven by higher business impairments due to economic and financial shocks arising from the pandemic.

The stress test takes into account the effects of the blanket moratorium and subsequent targeted repayment assistance for individuals.

“Business impairments are expected to be driven by defaults of maturing bullet repayments of firms operating in vulnerable sectors, mostly in the services industry which is expected to experience a slower recovery, and exposures to several large borrower groups with weaker financials,” it said in the report.

Household loan impairments are also projected to double albeit from historically low levels.

BNM said higher household impairments are expected to emerge in the second half of next year (2H21) given the extended repayment assistance programmes that will remain in place through the first quarter of 2021 (1Q21) for individuals who have faced a loss in income.

Overall, the central bank said credit costs to banks could rise to RM29 billion (1.4% of total loans) over 2020 and 2021.

“These projections assume conservative estimates of the share of loans under bespoke targeted repayment assistance (mainly for businesses) based on restructuring and rescheduling trends observed at the onset of the pandemic.

“With uncertain conditions persisting, banks have been much more proactive in extending repayment assistance, as seen in recent months,” it said.

It added that the number of businesses receiving repayment assistance from banks has increased sevenfold since July, which would improve debt serviceability and mitigate credit losses.

Meanwhile, BNM said in the residential property segment, house prices as measured by the Malaysian House Price Index (MHPI) registered positive albeit slower growth of 1.1% in 1H20 versus 2.2% in the same period last year.

It noted market activity weakened considerably and fewer housing projects launched during the 2Q further dampened market activity with the number of new units amounting to only about one-fifth (3,911 units) of the quarterly average last year.

The number of unsold houses also remained elevated at close to 170,000 units with 67% of them still under construction and 73% of the total priced above RM300,000.

The growth in household debt also moderated to 4% in 1H20 versus 5.5% in 1H19 amid movement restrictions and lower discretionary purchases as households turned more cautious, it said.