Banks back Bank Negara’s six-month loan moratorium

The automatic loan repayment deferment will provide a much-needed respite for borrowers, who were both directly and indirectly affected by the Covid-19 outbreak

PETALING JAYA: Banks say they back the six-month moratorium on all loan repayments announced by Bank Negara Malaysia (BNM) yesterday.

The moratorium was among the regulatory and supervisory measures imposed by the central bank aimed at assisting individuals, SMEs and corporations experiencing temporary financial constraints due to the Covid-19 outbreak.

Effective April 1 this year, banks will allow an automatic extension of credit facilities for a period of six months in a bid to ease cash flow.

Domenic Fuda, the group managing director and CEO of Hong Leong Bank and Hong Leong Islamic Bank Berhad, said the automatic loan repayment deferment would provide a much-needed respite for borrowers who were both directly and indirectly affected by the outbreak.

“We are deeply encouraged by BNM’s significant and decisive action to further help Malaysians weather this difficult period.

“We will continue to provide the necessary support and collaborate closely with our customers to make sure that short-term cash flow challenges don’t turn into problems of long-term business viability so businesses can re-start operations and individuals can return to work and normal lives can continue once the fight against Covid-19 is behind us,” he added.

Customers can opt out of this loan deferment by continuing to service their monthly loan/financing as normal.

For outstanding credit card balances, banks will offer borrowers the option of converting their credit card balances into a term loan of a tenure of not more than three years and an effective interest rate of not more than 13% per annum.

While interest will continue to accrue on loan or financing repayments (including auto and mortgages) that are deferred during this period, there will be no payment – on principal or interest – required during the six months.

HSBC Malaysia has gone a step further by deciding not to compound interest for conventional loans as well as profit on Islamic financing for both its retail and SME customers during the moratorium period.

“This is an extra measure taken by HSBC Malaysia for our retail and SME customers, above and beyond the loans/financing deferment measures announced by BNM,” said HSBC Malaysia CEO Stuart Milne.

OCBC Bank (Malaysia) Berhad and its subsidiary, OCBC Al-Amin Bank Berhad, will also not be compounding interest and profit respectively for its mortgages and SME loans/financing during the moratorium period.

“These are both trying and uncertain times, so we are seeking to alleviate our customers’ burdens as much as we can,” said OCBC Bank CEO Ong Eng Bin.

“Although compounding might be allowed, we have elected not to do so in light of the pressing circumstances,” he added.

The Association of Banks in Malaysia (ABM) is also supportive of the moratorium, calling it a “necessary solution” to mitigate the economic impact caused by the pandemic.

Stating that the country was in “unchartered territory” and vastly different from the usual market downturns or financial crises that have impacted countries in the past, ABM said its member banks fully agreed with the intent of the moratorium.

“The measures announced have been designed not only to support customers in this highly unusual global environment, but also to ensure that banks can continue to play their role in sustaining the country’s economy,” said ABM chairman Abdul Farid Alias.

“We hope it will provide customers some breathing space and allow them to focus on other critical aspects of their livelihood at this time,” said Farid, who is also Maybank group president and CEO.