If your finances are still affected by the pandemic, rest assured knowing that Bank Negara Malaysia (BNM) has confirmed that repayment assistance will extend until 2021. This article explains everything you need to know about the targeted assistance, read more to find out.
Though the continued uncertainty surrounding the country’s economy has left many Malaysians worried about their own financial circumstances, Bank Negara Malaysia (BNM) has reassured borrowers that repayment assistance will remain available for borrowers whose incomes have been affected by the pandemic.
"Borrowers need not be anxious. The repayment assistance is on-going and will extend well into 2021, we understand that circumstances and uncertainties could change down the road and people can reach out for assistance anytime,” BNM’s Deputy Governor, Jessica Chew told Bernama.
Borrowers who choose to decline repayment assistance for now should not be worried either, as they would still be eligible to apply for targeted assistance throughout 2020 and into 2021, especially if their financial circumstances change for the worse in the future, BNM said.
And although the moratorium, subsequent targeted approach as well as repayment assistance are “unprecedented in Malaysian banking history,” according to BNM, the banks have mobilised all their resources to handle the situation.
"The banks are very well positioned to respond to borrowers' needs. All banks have dedicated resources and re-engineered their processes to review borrowers’ applications," Chew said.
Additionally, assistance will continue to be offered to borrowers across a range of income groups, with special consideration given to households from the B40 category, micro businesses as well as borrowers affected by movement restrictions, BNM said in a separate statement.
So far, more than 640,000 applications for repayment assistance have been received, with an approval rate of around 98%, according to BNM. The types of packages offered by banks reflect the financial needs and circumstances of the borrowers.
Of those approved, 40% were granted an extension of the moratorium. These consisted mainly of individuals who have been recently made unemployed, as well as businesses in sectors that may still be experiencing significant operating constraints caused by the pandemic.
Another 60% of borrowers have requested a reduction in instalments, and these include those in the B40 group. Though it’s not a full blanket moratorium, BNM insists that instalment reductions work as they allow individuals and SMEs to be on a path to start paying down their loans at levels which they are comfortable with.
Among individuals who requested for repayment assistance, to date, about 50% have a monthly income of RM5,000 or less. Meanwhile, 28% are those with a monthly income between RM5,000 to RM10,000.
Borrowers in other income segments who need financial assistance are also being supported, according to BNM. These include individuals who earn variable incomes, and those employed in sectors that have been hit the hardest such as the tourism sector.
What is a targeted approach, and how will it benefit borrowers, savers and the economy?
A targeted repayment assistance approach is the best suited for now, Chew told Bernama, as it enables the banks to extend temporary relief to the borrowers that need it the most.
Additionally, compared to when the pandemic first hit, the banks are now better prepared and have put in place the infrastructure to help borrowers.
"In March this year when there was a sudden stop of activities across the board. Nobody ever thought that such a situation would occur. Under those circumstances, there was a need to provide immediate relief for the borrowers,” Chew told Bernama. "So now, not only is our healthcare system better prepared and ready but so are the banks."
A targeted repayment assistance also improves visibility of the loan performance of banks.
"There is still considerable uncertainty as we don’t know how long this pandemic is going to last, at least until a vaccine is developed. Hence, it is important that resources are conserved and directed to people and businesses who really need it,” she said.
New lending is also critical to support the economy's recovery and the banks must be comfortable to lend, explained Chew. "If resources are deployed elsewhere, it may affect credit flows to sectors which may require financing to resume their business activities. This could then in turn affect the economy and the pace of economic recovery," she warned.
All in all, a targeted approach to repayment assistance extends relief measures more sustainably, while lending strength to the country’s economic recovery.
Borrowers and likely scenarios under a targeted approach:
1. Borrowers who have started resuming repayments
Resuming repayments would be in the interest of this group as it would reduce their overall cost of borrowings. However, if their financial circumstances change down the road, BNM emphasised that targeted repayment assistance would still be available.
2. Borrowers who require repayment assistance
People in this group have the opportunity to customise their repayment plans based on what they can afford. If their circumstances change down the road, their most recent repayment records could be used to facilitate further assistance by banks.
“As more borrowers who can afford to repay, do so, more assistance can be made available to borrowers that need it,” according to the BNM statement. “Banks have been entrusted by the public to manage their savings. The public, as depositors, expect that banks discharge their fiduciary obligation by managing these funds prudently and using them to provide loans to the economy for productive purposes.”
“In addition, banks source capital from institutional funds, such as those managing the pensions, retirement funds and investments of Malaysians. It is therefore important to preserve a healthy credit culture where borrowers who can afford to repay do so.”
What to expect when applying for repayment assistance?
BNM urges affected borrowers to come forward to apply for repayment assistance with their banks through the various available channels. On top of that, banks are required to respond to applications for targeted repayment assistance within five days for individual borrowers and within 14 days for SME borrowers.
Borrowers who do not receive a response from their banks within these timeframes should contact BNMTELELINK (bnm.my/RAsurvey).
Borrowers affected by any Conditional Movement Control Order (CMCO) or Enhanced Movement Control Order (EMCO) measures, BNM said, can still expect a prompt and seamless process as banks in affected areas will continue to operate under appropriate SOPs. “Those unable to have face-to-face engagements or furnish documents due to movement restrictions can contact their banks via website, phone or email.”
Individual and SME borrowers can also reach out to Agensi Kaunseling dan Pengurusan Kredit (AKPK) if they are in need of advice and assistance, including options for debt restructuring.
Other possible scenarios that could require AKPK’s assistance is if borrowers needed additional tips on how to manage their repayments if they were already facing financial difficulties prior to the pandemic, as a moratorium extension may not be a sustainable solution, according to BNM.
In an effort to reach out to communities, the banking industry has been actively reaching out to borrowers in various ways, including through TV, radio, news outlets, social media and repayment assistance campaigns across the country. Banks have also reached out directly to borrowers through calls, emails and SMS.
What else do you need to know?
- Applications for repayment assistance at any time before 30 June 2021 will not appear on a borrower’s CCRIS records.
- There are no processing fees/charges associated with applications for repayment assistance for individual and SME borrowers.
- To obtain targeted assistance, borrowers need to apply directly from their respective banks.
- Visit BNM’s dedicated page on targeted repayment assistance if you need more information on the repayment assistance.
- Borrowers are also encouraged to fill in a form on BNM’s website to arrange for call backs from their banks.