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BNM Grant Automatic Moratorium On All Loans For Six Months, Here’s Five Things Borrower Should Understand

Picture via Bank Negara Malaysia

Bank Negara Malaysia (the Bank) today announces a number of regulatory and supervisory measures in support of efforts by banking institutions to assist individuals, small and medium-sized enterprises (SMEs) and corporations to manage the impact of the Covid-19 outbreak.

These measures allow banking institutions to remain focused on supporting the economy during these exceptional and unprecedented circumstances, by providing flexibilities for banking institutions to respond swiftly to the needs of their customers.

Deferment and Restructuring of Loans/Financing Facilities

  1. Loans/financing to individuals and SMEs

    To ease the cash flow of individuals and SMEs that are likely to be the most affected by Covid-19, banking institutions will offer a deferment of all loan/financing repayments for a period of 6 months, with effect from 1 April 2020. This offer is applicable to performing loans, denominated in Malaysian Ringgit, that have not been in arrears for more than 90 days as at 1 April 2020. For credit card facilities, banking institutions will offer to convert the outstanding balances into a 3-year term loan with reduced interest rates to help borrowers better manage their debt.

    It is important to note that the interest/profit will continue to accrue on loan/financing repayments that are deferred and borrowers will need to honour the deferred repayments in the future. Borrowers should therefore ensure that they understand and discuss with their banking institutions on the options available to resume their scheduled repayments after the deferment period.

    Individuals and SMEs that do not wish or need to avail of these flexibilities can continue with their current repayment structures.

  2. Loans/financing to corporations

    Banking institutions will also facilitate requests by corporations to defer or restructure their loans/financing repayments in a way that will enable viable corporations to preserve jobs and swiftly resume economic activities when conditions improve. Corporations should approach their banking institutions to discuss their repayment plans and the restructuring of credit facilities.

    The Bank has provided appropriate time-bound flexibilities for banking institutions to report deferred/restructured facilities in the Central Credit Reference Information System (CCRIS), taking into account the temporary nature of disruptions faced by borrowers/customers.

Subsequently, Ikmal Nordin, an economist has shared on his Facebook post gave the public an understanding of the moratorium issued by Bank Negara Malaysia.

1. No need to pay home loan & car loan for 6 months starting April 1st. This means that from April to September, payments are deferred.

But that doesn’t mean the loan is forgiven for 6 months. If before the loan expires December 2025, then it now will expire Jun 2026.

2. Credit card debt is still payable. But if you need to convert it into a 3-year loan with a 13% interest rate. That means it’s still in debt but it’s cheap and the duration of time to pay will be a little longer.

3. Prior to this there was a limit to banks for the purchase of property, shares and unit trusts. After that, the restrictions were abolished. Limits for lending to related companies like TNB, Petronas, and Telekom have been raised. Whatever it is, any electricity, gas, oil, and Unifi must go on.

4. How can the bank withstand all this, is there nothing to lose? That’s why BNM says banks’ reserves can be reduced, doesn’t have to save very much money, it can be used in times of crisis. The other day, BNM has liquidated some of the reserves that commercial banks hold in BNM.

5. All to shed light on the difficulties faced by the public at this time. And if you read this requirement carefully, it is until September. Anyone who ‘read between the lines’ will understand that BNM actually expects that Covid’s economic impact will last for more than 2 weeks. It’ll probably be the end of the year.

Source: BNM, Ikmal Nordin

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