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

KUALA LUMPUR – With the blanket loan moratorium set to end on September 30, banks are ready to assist borrowers affected by COVID-19 with repayment plans and other arrangements appropriate to their specific circumstances, said Bank Negara Malaysia (BNM).

In a statement on July 29, BNM said affected borrowers need to apply directly with their respective banks beginning August 7, in order to obtain loan repayment flexibility.

The statement was issued shortly after Prime Minister Tan Sri Muhyiddin Yassin announced measures to provide a targeted extension of the moratorium and repayment flexibility to individuals and small and medium enterprises (SMEs) who continue to be affected by COVID-19.

“BNM has communicated to the banks to deliver a simplified application and documentation process for borrowers. In recognition of these exceptional circumstances, the flexibility provided to borrowers during this period will not appear in the CCRIS (Central Credit Reference Credit System) reports of borrowers,” the central bank said.

“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,” said BNM. “Nonetheless, it is recognised that income and cash flow challenges remain for some, especially those who have lost their jobs or experienced a reduction in incomes.”

The banking industry will therefore provide a targeted moratorium extension and provision of repayment flexibility, it added.

BNM said individuals who have lost their jobs in 2020 and have yet to find new ones will be offered an extension of the loan moratorium for a further three months by their banks.

Meanwhile, individuals who are still employed but whose salaries have been affected due to COVID-19 will be offered a reduction in loan instalments in proportion to their salary reductions, for a period of at least six months and depending on the types of financing.

Banks will also consider extending the flexibility at the end of the extended loan period, bearing in mind the salaries of the borrowers at that time, said BNM.

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

In addition, BNM said banks have also committed to providing 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, which 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,” said BNM.

The central bank said all other borrowers who have the means should start to repay their borrowings as it will reduce their overall debts and borrowing costs.

To ease the application process for borrowers with loans from multiple banks, BNM said affected parties may approach the relevant “one-stop” centres to work out appropriate assistance packages.

For individuals, the Credit Management and Counselling Agency (AKPK) was recommended, while the Small Debt Resolution Scheme was endorsed for SMEs.

BNM said it 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 on ensuring that the banking system continues to carry out its intermediation function effectively in support of the economic recovery,” it added.