25 March 2020

BNM Loan/Financing Deferment Measure. How it works actually? (March 2020)

Bank Negara Malaysia (BNM) 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.

How is it works actually?

Loans/financing to individuals and SMEs

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 (maximum 13% per annum) to help borrowers better manage their debt.

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Questions and Answers:

What is the deferment of loan or financing repayment?

It is a temporary deferment or suspension of loan/financing repayment obligation (principal and interest) for a limited period of time. During this period, borrowers/customers with loan/financing that meet the conditions do not need to make any repayment, and no late payment charges or penalties will be imposed.

Interest/profit will continue to accrue on loan/financing repayments that are deferred and borrowers/customers will need to honour the deferred repayments in the future. Loan/financing repayment resumes after the deferment period.

Do I need to apply? 
No. All individual and SME loans/financing (excluding credit cards) that meet the criteria will automatically qualify for the deferment.

How do I know if my bank has enrolled my loan/financing into the deferment package? How do I know if I am qualified?

Banking institutions will provide individuals and SME borrowers/customers with adequate information that their loan/financing repayments have been deferred under this scheme.

Such information may be provided through a general advisory 
issued to borrowers/customers through appropriate channels, and/or published on banking institutions’ websites.

Can I opt-out from this measure and continue with my loan/financing repayments?
You should contact your bank if you wish to opt-out of the automatic deferment package, or continue to make timely and full repayment of your loan/financing.
Please respond to the notification sent by the bank and informed that you wish to opt-out of the automatic deferment package, or continue to make timely and full repayment of your loan/financing.

Will I be charged additional interest on the repayment amount that is deferred by 6 months during the period?

For conventional loans, interest will continue to be charged on the outstanding balance comprising of both principal and interest portion (i.e. compounded) during the moratorium period.
For Islamic financing, profit will continue to accrue on the outstanding principal amount. Such profit, however, will not be compounded in line with Shariah principles.

Banks are however not allowed to impose late penalty charges on the deferred amount.  In other words, the loan/financing repayment is just deferred by 6 months.

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Source: Bank Negara Malaysia press release (click here)
Source: Frequently Asked Questions (click here)

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