BNM: Targeted assistance to sustain banking sector's resilience

KUALA LUMPUR – Targeted assistance will enable banks to assess the unprecedented situation brought about by the COVID-19 pandemic and channel funds to much-needed sectors and aid economic recovery, as reported on Bernama on October 25.

Various measures including the Special Relief Facility (SRF) amounting to RM10 billion have been rolled out to provide temporary relief to businesses, Bank Negara Malaysia‘s (BNM) Deputy Governor Jessica Chew said.

Besides SRF, which has been fully taken up, other funds such as PENJANA SME Financing, SME Digitalisation Matching Grant, and Smart Automation Grant are still available to provide support to businesses in their resumption and recovery.

The PENJANA Tourism Financing of RM1 billion is still available for businesses in the tourism sector. This fund is to enable the sector to adjust to the new norm, allowing businesses to revive and recover more quickly.

However, for businesses to sustain their recovery and households to have continued access to financing, the banking sector must itself be sound.

The resilience of the banking sector is important and targeted assistance is the right way forward, Chew told Bernama in an interview.

“Targeted assistance helps people get back on track and reduces their overall debt. Available information on a borrower’s repayment history also encourages banks to lend.

“Conversely, the absence of repayment data resulting from a blanket moratorium will impair the financial system’s ability to mobilise new loans that are critical for economic recovery,” she asserted.

Malaysia’s household debt is at a high 87% of the country’s gross domestic product, hence maintaining a healthy credit culture is important to ensure continued intermediation activity. Borrowers who can afford to resume loan repayments are advised to do so.

For borrowers who have the financial capacity, resuming repayment is the preferred option as it is not in their interest to unnecessarily roll over their loans and incur higher borrowing costs.

As at August 2020, the total value of loan repayments had reached 70% of pre-moratorium levels.

“People were coming forward, especially during the RMCO (Recovery Movement Control Order) when people felt that they were in a better position. They were starting to repay their loans even before the moratorium ended,” noted Chew.

Banks continue to assist borrowers through repayment assistance arrangements which are tailored to mitigate the latter’s financial predicament.

When asked on the varying tenures of repayment, Chew said if borrowers could maintain their original monthly payments with some adjustments because of the accrued interests, their tenure would not change much.

However, if their monthly payments are substantially reduced and restructured due to their current financial circumstances then the tenure may need to be lengthened further, she explained.

Besides, it is also vital to preserving the resilience of the banking and financial sector in the country, said Chew when asked if a blanket moratorium is not possible as the banking sector appears to be on solid footing.

“The banking system is on solid footing from years of observing sound lending standards and building up of capital buffers.

“{However,] there remains considerable uncertainty until a vaccine is widely available,” she said, adding that the banking and financial sector buffers will be important for banks to support the economy throughout the current period of uncertainty and ensure that resources are directed to those who need help.

The BNM deputy governor assured borrowers that every effort has been made to simplify the repayment assistance application process.

Multiple channels of support are provided for borrowers in dilemma, such as BNMTELELINK and Credit Counselling and Debt Management Agency (AKPK). The central bank also holds regular engagements with small and medium enterprises to address any issues they face.

Borrowers can contact BNMTELELINK at 1-300-88-5465 or AKPK at 03 2616 7766.