Premature to end loan moratorium as scheduled, says Johor Bahru MP

The moratorium on loan repayments has assisted more than 7.7 million people and 243,000 SMEs so far.

KUALA LUMPUR: Johor Bahru MP Akmal Nasir today urged the government to hold discussions with banks on a six-month extension to the moratorium on loan repayments to allow borrowers more time to recover from the economic impact of the Covid-19 pandemic.

Speaking in a press conference here today, he said he disagreed with Finance Minister Tengku Zafrul Abdul Aziz who said in the Dewan Rakyat yesterday that the moratorium would have to end as banks were suffering losses of over RM1 billion each month.

He said while banks might face losses, small businesses and borrowers would suffer more if the moratorium ends as scheduled.

He also asked how banks would face losses as borrowers still need to repay their loans after the moratorium.

“Based on the people’s understanding, a moratorium is a suspension of loan payments, not a cancellation of loans.

“Do these ‘losses’ just mean delays in profits (for the banks)? In fact, some small business borrowers are forced to bear compounded interests throughout the moratorium,” he added.

Akmal Nasir

He also said it would be premature to end the moratorium soon as the economy had yet to stabilise.

He said this would cause more losses for the banking industry as borrowers would fail to make payments, turning their loans into non-performing loans (NPLs).

“The NPL rate before the moratorium was around 1.57%, which is a low rate. However, with economic activities still declining, on top of the possibility of an increase in Covid-19 infections and internal pressure by Perikatan Nasional that is urging for snap polls, the economy will remain uncertain.

“An extension to the moratorium would allow individual and small business borrowers to revive their income. If the moratorium stops before the economy stabilises, the NPL rate will increase, which would then cause banks real losses.”

Yesterday, Tengku Zafrul said the government had implemented more than 80 initiatives under its economic stimulus packages and that the moratorium had assisted more than 7.7 million people and helped 243,000 or 95% of SMEs.

He said discussions are ongoing on the possible extension of the moratorium, adding that it was up to the banks if they wished to extend the loan moratorium in a targeted manner.

Meanwhile, former finance minister Lim Guan Eng said extending the moratorium would be a “small price to pay” for the banking industry given the number of people and businesses that had benefitted from it.

In a statement, he said the banking industry had earned an estimated RM32 billion in after-tax profits for 2019.

He said this should provide sufficient cover for banks to bear the RM6.4 billion cost of delivering their corporate social responsibility of extending the moratorium to aid their customers during the current economic crisis.

In the event that banks are unwilling to cough up the RM6.4 billion, he said, the federal government could bear the cost instead.