We refer to a recent news report on the sale of non-performing loans (NPLs) to foreign parties by banking institutions that is inaccurate and misleading. 

Banking institutions can dispose off their NPLs as part of the bank's risk management practice. Disposal of NPLs provides the flexibility for banks to manage their loan portfolio effectively and efficiently to maximize recovery to protect depositors' interest.  

Any recovery action must be in accordance with the law.

Banking institutions are permitted to sell their NPLs to non-banking institutions provided that the sale of NPLs is made in accordance with the requirements of the Guidelines on the Disposal/ Purchase of Non-Performing Loans by Banking Institutions which are issued under the Banking and Financial Institutions Act 1989.

The Guidelines sets out certain requirements that must be met by any banking institution proposing to sell NPLs :

1. Banks can only sell to locally incorporated companies which the purchaser is majority owned by domestic shareholders as the purchaser is subject to a foreign equity cap of 49%.
2. Banks are also required to undertake necessary measures to inform the borrower of the sale of the NPLs;
3. Sale of NPLs that is made in accordance with requirements of the Guidelines do not contravene the BAFIA.
4. Sale of NPL does not affect any debt restructuring agreements.

The amount of NPLs sold in the news report is grossly overstated. Since 2005, NPLs sold by banks is less than RM 3.0 billion.