The issue has come under scrutiny during the loan moratorium, with some arguing that deferring – but not waiving – interest will saddle borrowers with higher future costs once their repayments restart.
Weerasena said that although a waiver will help lighten household debt to a certain extent, the impact will not be that substantial because of the smaller accrued interest of B50 loans.
He added that a blanket interest waiver could see opportunistic borrowers benefitting rather than those who genuinely needed it.
“More worryingly, this move might backfire in the long-term, whereby banks are more averse to lend to B50 individuals and households as a result of perceived high risks.”
Weerasena said the waiver could also potentially jeopardise national financial stability.
“For instance, will this interest waiver be prolonged to six months or even extended to small and medium enterprises (SMEs)? This will affect the liquidity of our banking system in the long run.”
He said a targeted interest waiver for those who are really in need might be more effective but debt restructuring for vulnerable borrowers should also be considered.
“This will enable vulnerable individuals and households to gain greater flexibility in the short-term and make their debt burden more manageable.”
Yeah Kim Leng of Sunway University said any move to force banks to give a waiver would send the wrong message to the market.
“If the banks opted to give a waiver as a corporate social responsibility (CSR) measure, that would be good, every little bit helps.”
But Yeah said a better alternative to a waiver was debt restructuring as this was a long-term solution.
“The immediate priority should be to replenish the incomes of those hardest hit by the pandemic. This can be done through wage subsidies, reskilling, upskilling or employment opportunities.
“This would go a long way, not only in terms of helping people survive the pandemic but to better ensure they can earn more money and survive after retirement.”
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