Banks to provide loan repayment flexibility to borrowers affected by COVID-19

Bank Negara Malaysia (BNM) refers to the announcement by Yang Amat Berhormat Prime Minister on measures to provide a targeted extension of the moratorium and repayment flexibility to individuals and SMEs who continue to be affected by COVID-19.

Ahead of the blanket moratorium ending on 30 September 2020, BNM has been working closely with banks to ensure that assistance continues to be provided to borrowers affected by COVID-19. Banks stand ready to assist borrowers affected by COVID-19 with repayment plans and other arrangements appropriate to their specific circumstances.

The more targeted approach to assist individual and SME borrowers is in line with the easing of movement controls since early May. Businesses in almost all sectors have since resumed operations, and the vast majority of Malaysians have returned to work. With that, many borrowers who initially opted for the moratorium have started to resume loan repayments.

Nonetheless, it is recognised that income and cashflow challenges remain for some, especially those who have lost their jobs or experienced a reduction in incomes. In this regard, a targeted approach ensures that financial resources and attention are prioritised where it is needed the most.

The banking industry will provide a targeted moratorium extension and provision of repayment flexibility as follows:

• Individuals who have lost their jobs in 2020 and have yet to find a job will be offered an extension of the loan moratorium for a further three months by their bank.
• Individuals who are still in employment but whose salaries have been affected due to COVID-19 will be offered a reduction in loan instalment in proportion to their salary reduction, depending on the type of financing. Banks will offer the flexibility for a period of at least six months. Banks will also consider extending the flexibility at the end of that period, bearing in mind the salary of the borrower at that time.

For hire purchase financing, affected borrowers will be offered revised instalment schedules that are consistent with the Hire-Purchase Act 1967.

In addition, banks have also committed to provide repayment flexibility to other individuals and all SME borrowers affected by COVID-19. The flexibility offered by each bank will take into account the specific circumstances of borrowers. This includes:

• Allowing borrowers to pay only the interest portion of the loan over a period of time;
• Lengthening the overall period of the loan to reduce monthly instalments; or
• Providing other forms of flexibility until a borrower is in a more stable position to resume repayments in full.

All other borrowers who have the means should start to repay as it will reduce their overall debt and borrowing cost.

How to apply

To obtain these flexibilities, borrowers need to apply directly to their respective banks beginning 7 August 2020. BNM has communicated to the banks to deliver a simplified application and documentation process for borrowers. In recognition of these exceptional circumstances, the flexibilities provided to borrowers during this period will not appear in the CCRIS reports of borrowers.

To ease concerns of borrowers with loans from multiple banks, they may also approach the relevant “one-stop" centre to work out an appropriate assistance package:

• For individuals, Agensi Kaunseling dan Pengurusan Kredit (AKPK)
• For SMEs, Small Debt Resolution Scheme (SDRS)

BNM will monitor the progress of banks in assisting borrowers that may continue to face temporary financial difficulties. The Bank will also continue to focus efforts in ensuring that the banking system continues to carry out its intermediation function effectively in support of the economic recovery.

Bank Negara Malaysia
29 July 2020

About AKPK

AKPK is an agency established by Bank Negara Malaysia to provide advisory services and assistance to individual borrowers in managing their finances through the provision of (i) counselling and advice on financial management; (ii) debt management programme to assist consumers to regain financial control; and (iii) financial education on the responsible use of money and credit management skills. AKPK can be contacted at akpk.org.my.

About SDRS

SDRS was established by Bank Negara Malaysia to provide assistance to SMEs in restructuring or rescheduling their loans with financial institutions. SDRS can be contacted via BNMLINK at telelink.bnm.gov.my.