Frequently Asked Questions about the Bank Negara Malaysia’s Moratorium
COVID-19 has inevitably hit hard on the economy of Malaysia. Many individuals and businesses (non-essential services) have stopped operating due to the contagious disease.
Thankfully, the government and Bank Negara Malaysia (BNM) stepped in and introduced the 6 months moratorium to ease and cushion the economic impact felt by most if not all Malaysians.
Here are the frequently asked questions about the Bank Negara Malaysia’s moratorium.
What is deferment of loan or financing payment?
It means that the Borrowers/Customers do not need to make any repayment for their bank loan, and there is no late penalty charges;
- Applies to individuals and SMEs (Corporates need to request from their banks);
- Applies to existing loans/financing (not newly approved/disbursed loans);
- Applies to all banks and institutions regulated by BNM;
HOWEVER, the interest charges will continue to run during this period, and will be added to the outstanding loan amount, and shall be payable after this period ends. In other words, after the moratorium, the Borrowers/Customers are still required to repay your loan, along with the total interest charges from that period. (further discussed in Point 5 below)
Who qualifies for the deferment?
Individual and SME customers with conventional/Islamic loans are automatically entitled to the deferment;
It does not apply to those with outstanding credit card payments;
No need for application. You will automatically qualify if:
- as at 1st April 2020, you have no defaulted loan payment for more than 90 days; and
- your loan is in Malaysian Ringgit.
How long is the moratorium?
A period of 6 months, from 1st April 2020 until 30th September 2020.
What if I do not want to take up the automatic moratorium?
The Borrowers/Customers should contact their bank to opt-out of the automatic deferment package, or continue to make timely and full repayment of the loan/financing;
The bank will automatically perform the deferment if the Borrowers/Customers do not respond to the notification regarding the moratorium.
How does this moratorium affect interest charges?
Interest will continue to accumulate during this period in the following manner:-
- Conventional loans: interest will continue to be charged on the outstanding balance comprising both principal and interest portion (i.e. compounded) during the moratorium period;
- Islamic financing: profit will continue to accrue on the outstanding principal amount. Such profit, however, will not be compounded in line with Syariah principles.
Thus, in the context of conventional loans, while the Borrowers/Customers may not have to pay anything now (whether it’s the loan or interest), the Borrowers/Customers will end up paying more in the long run as all accrued interest during those six months will still be added to the total amount that they owe.
You have a loan with an interest rate of 12% per annum, you would roughly be accruing interest at a rate of 1% per month. So if you took a personal loan for RM10,000, the total amount that you need to repay would increase at a rate of RM100 per month.
If you were paying RM500 per month to cover the loan, RM100 of it would go to paying off the interest. However, during this moratorium period you would not be paying anything, but the amount that you need to repay would still be increasing.
To be clear, under normal circumstances you would also be accruing interest during this time. The exception is that your monthly instalments would be used to pay down this interest. Now, without the instalments, the interest is simply being added to the total loan amount.
So, for conventional loans, the compound interest (which is the addition of interest to the principal sum of a loan or a deposit/ a.k.a. “interest on interest”) will continue to run during the period, and it will be payable after the moratorium ends (on top of the loan).
**HOWEVER, while BNM’s announcement was only about the deferment of payments, some banks have announced that, in line with BNM’s moratorium to alleviate financial strain on their individual and SME customers, they WILL NOT be compounding interest/profit rates during this period on their own accord (along with their conditions).** Kindly check with your respective banks for the latest updates in regarding to this.
What if I’m a credit card holder?
The deferment of payment does not apply.
Will the deferred payments be reflected in CCRIS as a poor record?
No. There will be no negative implications to your CCRIS record.
Note: BNM has strongly advised that the Borrowers/Customers pay attention to the notices from their respective banks to obtain specific information. They are reminded to carefully consider the payment options proposed by their respective banks, in particular on how to resume payments after the deferment period. This may include higher subsequent instalment amount while preserving the original loan/financing tenure, or an extension of the loan/financing tenure after the 6- month moratorium period. More information can be found in BNM’s FAQ, which acts as a base guideline for all banks.
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