Ensure loan repayment moratorium extension is interest-free, Putrajaya told

Solomon said the zero additional chargers to borrowers must be spelled out clearly in banks’ application forms and any newly revised loan agreements signed by the borrowers with the banks. — Reuters pic
Solomon said the zero additional chargers to borrowers must be spelled out clearly in banks’ application forms and any newly revised loan agreements signed by the borrowers with the banks. — Reuters pic

KUALA LUMPUR, Aug 13 — The Malaysian Trades Union Congress (MTUC) today urged Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz to state unequivocally that banks may not accrue or compound interest charges on borrowers benefiting from the extension of the repayment moratorium.

In a statement today, MTUC secretary-general J. Solomon said that when the initial six-month blanket moratorium was introduced, banks initially remained silent on the accrual of interest on unpaid installments and only said they would not compound these after public complaints.

“Only after persistent calls by various organisations, including MTUC, did the government intervene to ensure that banks did not charge compound interests to those who opted for the moratorium.

“Now that the three-month moratorium is specifically targeted to those badly affected by the Covid-19 pandemic, the government has the moral responsibility to ensure that there will be no additional charges by banks,” he said.

Solomon said the zero additional chargers to borrowers must be spelled out clearly in banks’ application forms and any newly revised loan agreements signed by the borrowers with the banks.

“The banks must ensure the very same waivers given on interest payments during the initial six-month moratorium remain in place,” he said.

MTUC expressed concern that banks may reconsider the waivers on interest by exploiting Tengku Zafrul’s statement depicting that the moratorium was costing them around RM1 billion per month.

“MTUC and many others have already debunked such claims as banks are only deferring the repayment of loan installments, not forgoing them altogether.

“Our fear is that financial institutions will use the finance minister’s statements on their purported ‘sacrifices’ as a reason to extract their full pound of flesh from borrowers in the form of interest charges,” he said.

Last month, Tengku Zafrul Abdul Aziz said the banking sector was estimated to see losses of RM6.4 billion during the loan moratorium period, between April and September.

Responding to a question in Parliament from former finance minister Lim Guan Eng (PH-Bagan) on costs borne by banks due to the moratorium and further assistance in the event there is a second lockdown, Tengku Zafrul said banks face losses of approximately RM1.06 billion per month based on Malaysian Financial Reporting Standards (MFRS) 9.

Meanwhile, Solomon once again suggested that the government automatically extend the loan moratorium by at least six months for all B40 and M40 families irrespective of their employment status.

He said B40 and M40 groups are the ones who most need an extension to the current moratorium, as many of them are either without jobs or have been forced to take pay cuts.

He said compelling them to apply to banks to grant them an extension to the moratorium is an unnecessary burden and a bureaucratic hassle.

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