KUALA LUMPUR, Sept 23 — Malaysians should ask their banks for help as soon as possible before the moratorium or temporary suspension of loan instalments ends on September 30, local banks have said today.
The local banking industry today said that borrowers should not put off seeking help until the eleventh hour if they cannot cope with their loans, as it would then result in them being recorded as having been late in making repayments and affect their credit standing.
CIMB CEO Datuk Abdul Rahman Ahmad said borrowers should approach the banks now before they run into difficulties in making loan repayments when the moratorium ends on September 30, having highlighted the multiple avenues that borrowers could seek help such as via online platforms or with banks opening even on weekends and with longer operating hours in the weeks leading up to the end of the moratorium.
“Of course, if they don’t come forward and the automatic moratorium ends, instalments will become due post-September. Obviously, if they don’t make payments, they will become overdue, and at that point of time, all banks will normally call them and do what we call the collection process.
“Which is why I think it’s very important for borrowers who feel they are affected to really approach the banks, otherwise we don’t know they need help. When the instalment is due, if they don’t pay, it will be recorded as overdue,” he told reporters at a media roundtable with CEOs of six banks and the CEO of the Credit Counselling and Debt Management Agency (AKPK).
Abdul Rahman stressed that borrowers should contact or visit their banks as soon as possible before September 30 to work out arrangements for their loans, instead of going through the experience of being recorded in the system as having been late for their loan repayments.
“Don’t wait until the amount is overdue. Please come to us as quickly so that we are able to help and provide the assistance before this happens,” he said.
Avoid CCRIS recording late payment by getting help now
At the same event, Bank Islam CEO Mohd Muazzam Mohamed noted that some of the local borrowers are waiting to the “last minute”, with only an increase in the number of borrowers in the past two weeks amid the banks’ heavy outreach efforts to alert Malaysians of the offer to work out flexible arrangements for their existing loans.
“There could be some fencesitters. Some are still hoping for the automatic moratorium to be extended,” he said, noting that some may hope that the moratorium or freeze on them having to pay loan instalments would be extended without them having to do anything.
But he said that borrowers should not hold such hopes but instead ask the banks for assistance in working out flexible loan repayments, instead of risk having the computerised database Central Credit Reference Information System (CCRIS) recording their credit profile as being late in paying loan instalments.
“However, we want people to come sooner than later. Because at the end of the day, once you are late, it shows in the system, CCRIS is going to be updated,” he said.
Bank Rakyat CEO Datuk Rosman Mohamed observed that some borrowers appear to be taking a “wait-and-see” approach or seeking assistance at the “last minute”, but said they should not do so as the automatic moratorium on all loans would be ending on September 30.
He cautioned that borrowers should be aware that the amount of income that they can spend would be reduced from October onwards, as they would have to use their income to start making repayments on their loans.
“Seems to be people are trying their luck. Majority of our customers who are government employees, when October kicks in, we will start deducting salaries. We are dealing with Angkatan Kerjasama Kebangsaan Malaysia Berhad (Angkasa) — automatically salary will be deducted. People need to be aware that their disposable income becomes much less from October onwards,” he said.
To date, 98 per cent of the 380,000 borrowers who have applied for loan repayment assistance have received approval for such aid from the banks, with the banks pledging to help and provide flexible repayment arrangements to individuals or businesses affected by Covid-19.
The banks are offering borrowers various options depending on their situations, including allowing them to pay only the interest on their loans for a certain period of time, or making the loan period longer to reduce the instalment amount to be paid every month.
Why the automatic loan moratorium should not be extended
CIMB CEO Abdul Rahman pointed out the importance of not having the automatic freeze or moratorium on all loan repayments go on indefinitely, and to instead move to a targeted moratorium approach for borrowers who really need to pause their loan repayments even after September 30.
Noting that there are still calls for the automatic loan moratorium to be extended, Abdul Rahman said however that stopping a blanket moratorium — where even those who don’t need such financial aid are temporarily not required to pay their loans — would enable banks to get the actual data on which borrowers can or cannot make their loan payments.
“Those who cannot pay, we will help. There’s no two ways about it. But if we don’t have that data, it’s very dangerous, because then all banks are unsure what is the underlying (asset) quality. And because we are unsure, they will not be able to lend and to help the economy recover.
“The economy can only recover if banks are strong and able to lend to the people who want to borrow money, to invest productively, to buy houses and cars,” he said.
“With a targeted moratorium, we will then know. We will help those that need it, but then it provides us comfort that we can refocus our attention to really lending into the economy to ensure that effectively it recovers from the pandemic. Because it’s a very populist thing to say, ‘Let’s extend the moratorium’, but not understanding the impact to the underlying economy,” he added.
For any borrowers who have lost their jobs at any point of time this year, banks in Malaysia will be offering a three-month moratorium on their loans, with the borrowers still able to approach the bank if they have yet to get a job after three months and to work out further arrangements on the loan, he explained.
He said that borrowers would of course have to produce relevant documentation such as a letter on the termination of their employment, noting that this is not to make things difficult for borrowers but to enable banks to have proper and sufficient documentation to ensure that loan repayment assistance is not abused.
As for the local banking industry’s capability to face any economic downturn amid the Covid-19 pandemic, Abdul Rahman said: “Bank Negara has mentioned, Malaysian banks are well-capitalised in terms of our ability to withstand shocks. I think we are in a much stronger position compared to the 1997 crisis that we faced. So I’m confident if the pandemic is contained and the economy recovers and all the actions that the government is taking for the economy to regrow, I think all the banks are resilient and will be able to withstand and navigate through these challenging times.”