Household segment’s gross impaired loans ratio increased in July, says BNM


FINANCIAL institutions continue to set aside additional provisions against potential credit losses, which stood at 1.9% of total banking system loans, said Bank Negara Malaysia (BNM).

The central bank said in its monthly highlights for July 2021 said that overall gross impaired loans ratio increased marginally to 1.7% driven by the household segment.

“Banks continue to facilitate repayment assistance for viable borrowers facing temporary financial difficulties amid a credit risk outlook that remains challenging,” the central bank said.

BNM also said the banking system’s liquidity position remained supportive of financial intermediation.

“The banking system continued to maintain healthy liquidity buffers with the liquidity coverage ratio (LCR) remaining strong in July.

“Banks’ funding profile remained stable amid sustained growth in deposits as individuals, businesses and non-bank financial institutions continue to maintain precautionary cash buffers,” it said.

Malaysia’s headline inflation fell to 2.2% in July compared to 3.4% in June, reflecting lower inflation for transport as well as housing and utilities respectively, said Bank Negara Malaysia (BNM).

The lower housing and utility inflation was mainly due to the implementation of the three-month electricity tariff rebate, beginning July 2021,It added the underlying inflation, as measured by core inflation, remained stable at 0.7%.

For the financial markets, BNM said the domestic markets continue to be influenced by the Covid-19 developments.

“In July, financial markets were affected by concerns surrounding the global and domestic growth outlook following the rise in the spread of Covid-19.

“The FBM KLCI had also declined by 2.5% as investor sentiments were affected by the rise in coronavirus infections domestically and the imposition of stricter containment measures (FMCO) in Kuala Lumpur and Selangor,” it said.

Globally, the central bank said the concerns had led to an increase in demand for safer assets, contributing to a decline in US Treasury yields and a broad-based strengthening of the US dollar.

“In line with this, the 10-year MGS yield declined by 11.3 basis points and the ringgit depreciated by 1.8% against the US dollar,” it said.

BNM said the financing growth moderated to 4.0% in July compared to June at 4.3% due to lower outstanding loan growth and outstanding corporate bond growth.

“Outstanding household loans grew by 4.2% with moderation across all loan purposes amid the containment measures and mobility restrictions.

“For businesses, outstanding loan growth increased to 1.3% supported by higher working capital loan growth,” it said.