The government has announced a targeted extension for the moratorium on bank loans for those who either lost their jobs or had pay cuts this year as a result of the Covid-19 pandemic. Prime Minister Tan Sri Muhyiddin Yassin said individuals who lost their jobs in 2020 and still haven’t gotten a new job can enjoy the moratorium for another three months, up to 31 December. He added that after three months, the moratorium period can be extended by the banks depending on the individual’s situation. For individuals who are employed but have had their wages cut, their monthly installments will be decreased in tandem with their pay cuts. Tan Sri Muhyiddin also said the banks had given their commitment in the form of several measures to assist borrowers, regardless of whether they were individuals or small and medium enterprises (SME). He said these measures were expected to benefit up to three million individuals and SMEs. The measures include only paying the interest for a set time frame, extending the duration of the loan to reduce monthly repayments, and other forms of relief until the borrowers were financially stable.
Tan Sri Muhyiddin added that according to Bank Negara, the moratorium had benefited more than seven million individuals, with repayments totalling RM38.3bil up to July 20. He added that 243,000 SMEs benefited from the moratorium with repayments worth RM20.7bil in the same period. The loan moratorium was a feature from the first relief package during the movement control order by the government that saw business and consumer activity basically grind to a halt, except for essential services.
Meanwhile, economists have lauded the extension of the loan moratorium. MIDF Research economist Mazlina Abdul Rahman said the extension of the loan moratorium has a “minimised” impact on the country’s banking sector. This is backed by Malaysia’s improving economy, she said, citing its gradual recovery phase with some macro indicators showing a healthy trend, such as industrial production, exports and retail sales. “The fact that it’s targeted also means that the impact to the banking sector is minimised,” Mazlina told theedgemarkets.com. “We believe this is a better option than to continue providing the moratorium on a blanket approach. It is because there could be many borrowers who are opting for moratorium not because they are in financial distress but simply [because they] want to use the opportunity to preserve capital or for investment purposes,” she added.
Her sentiment was echoed by Hong Leong Investment Bank Bhd (HLIB) banking analyst Chan Jit Hoong who said the quantum of new modification loss should be lower than the prior blanket automatic deferment as it is aimed at a smaller audience. This initiative, he said, did not come as a surprise and is consistent with what banks have been mulling to do after the current six-month moratorium ends on September 30. “We believe it is a more sustainable method to help the rakyat and also restrains non-performing loans (NPLs) from ballooning out of control over the short-term. However, it may hide actual damage and cause lag in NPL formation if the situation does not improve rapidly or an advent of COVID-19 second wave paralyses the country again,” he said.
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz had estimated the impact from the loan moratorium on fixed rate loans to be about RM6.4 billion in losses during the loan moratorium period, between April and September. In his announcement today, Prime Minister Tan Sri Muhyiddin Yassin said the number of individuals and businesses that opted out of the original six-month moratorium has been rising since the gradual reopening of the economy last May.
Between April and July, he said the number of individual borrowers who made loan repayments increased from 331,000 to 601,000 while the number of SME borrowers that made loan repayments rose from 5,000 to 13,000.
