Highlights

  1. During the period of MCO due to the COVID-19 pandemic, the economy has gone through a temporary shutdown where business has to be closed or restricted in compliance with the MCO imposed.
  2. A lot of employees have been retrenched or forced to take Voluntary Separation Scheme (VSS) due to the loss suffered by the companies.
  3. Small and medium size enterprise and corporations were also affected as it is difficult to generate revenue due to COVID-19 pandemic.
  4. Most of the individuals, corporates and enterprises have monthly obligation to serve their loans with the bank.
  5. Bank Negara Malaysia (BNM) has provided assistance to assist the individuals, small and medium size enterprise and corporations that have been affected by COVID-19 pandemic.
  6. The assistance by BNM consists of moratorium in form of temporary deferment or suspension of loan/financing payment obligation (principal and interest/profit) for a limited period of time.
  7. There will be no late payment charge for such deferment.
Understanding The Measures Introduced by Bank Negara Malaysia On 25.3.2020

 

Q1. What are the measures introduced by Bank Negara Malaysia to assist the individuals, small and medium size enterprise and corporations that have been affected by COVID-19 pandemic

Answer:

a. On 25.3.2020, Bank Negara Malaysia (BNM) has announced regulatory and supervisory measures with the support of financial institutions to assist individual, small and medium size enterprises (SMEs) and corporations that have been affected by Covid-19 pandemic to manage their financial commitment[1];

b. It is a temporary deferment or suspension of loan/financing payment obligation (principal and interest/profit) for a limited period of time;

c. It must be noted that the deferment comes together with no late payment charges that can be imposed, although the existing interest will be charged as per usual to the deferred loan repayment once the repayment resumes. However, conditions must be met by the borrowers to be eligible with the deferment.

d. Loan/financing repayment resumes after the deferment period and if such repayments are not fully settled when it is due, late payment penalties will be imposed.

Q2. Which financial institutions offer this deferment package?

Answer:

All licensed banks, licensed Islamic banks, licensed investment banks and prescribed development financial institutions regulated by BNM will provide this deferment package[2].

Q3. Which loan/financing qualifies for the deferment?

Answer:

a. For individuals and small and medium enterprises (SMEs), the deferment in conventional loans or Islamic financing payment obligations (except credit card) are automatically affected by Financial Institutions if the loans/financing meet these criteria[3]:

  1. not in arrears exceeding 90 days as at 1 April 2020; and
  2. In Malaysian Ringgit currency.

Q4. As a corporation, what would be the criteria to opt-in?

Answer:

a.Corporate borrowers/customers should refer to their Financial Institutions for the deferment and rescheduling/restructuring of their loans/financing. The criteria are subject to each Financial Institutions internal credit policies and assessment[4].

b. In addition, these loans/financing must meet these criteria:

  1. not in arrears exceeding 90 days as at 1 April 2020; and
  2. In Malaysian Ringgit currency.

Q5. Do I need to apply for the deferment package?

Answer:

All individual and SME loans/financing that meet the criteria, the deferment will operate automatically[5].

Q6. How do I know if my Financial Institution has applied for the deferment package on my loan?

Answer:

a. The deferment will automatically apply to all individuals and SME’s who did not default and/or having any arrears of their conventional loan or Islamic financing obligation exceeding 90 days as at 1.4.2020[6]

b. The financial institutions will reach out to each of borrowers with more information about the deferment period and gives you the option whether to opt out whereby if a borrower did not respond to the notification, the deferment would be automatic.

Q7. If the borrowers have arrears or default exceeding 90 days as at 1.4.2020, what would happen to them?

Answer:

If an individual/SMEs/corporations have already in default of repaying loan more than 90 days, as at 1.4.2020 you will not be automatically qualified for the deferment package. You will have to repay your loan as per usual without any deferment[7].

Q8. If I opt for the deferment, will it have any adverse effect to my CCRIS record?

Answer:

Your CCRIS record will not be affected during the deferment, instead it will remain the same as at 1.3.2020[8].

Q9. If my loan is already under restructuring and rescheduling, would I still be eligible for the deferment package?

Answer:

Yes, as long as the following conditions are fulfilled[9]:

  1. not in arrears exceeding 90 days as at 1 April 2020; and
  2. in Malaysian Ringgit currency.

Q10. Does this deferment package apply to newly approved/ disbursed loans/financing?

Answer:

It applies to all loans/financing outstanding as at 1 April 2020[10].

Q11. Will I be charged with additional interest/profit on the instalment amount that is deferred by 6 months during the period?

Answer:

a. For conventional loans, interest will continue to be charged on the outstanding balance comprising of both principal and interest portion during the deferment period. However, some Financial Institutions may decide not to compound interest during the deferment period[11].

b. For Islamic financing, profit will continue to accrue on the outstanding principal amount. Such profit however will not be compounded in line with Shariah principles.

c. Hence, it is prudent that borrowers to make an informed decision either to opt or let the automatic deferment to be applied by contacting their financial institutions and considering the effect of the deferment. With informed decision, a borrower will know how to manage their future repayment once the deferment period ended.

d. Nevertheless, Financial Institutions are not allowed to impose late penalty charges on the deferred amount. In other words, the loan/financing payment is just deferred by 6 months and does not connote as delay in repayment.

Q12. Will my tenure of loan be prolonged due to the deferment?

Answer:

Borrowers must consider about their repayment after the 6 months deferment by contacting their financial institutions. Some financial institution will have options of increasing the instalment repayment in order to maintain the tenure or prolong the loan tenure to maintain the original monthly instalment[12].

Q13. Can I extend the tenure of my financing after the deferment period ends?

Answer:

Yes, Financial Institutions are allowed to extend the tenure beyond the maximum tenure for personal, home and hire purchase financing by no more than 6 months, but only possible for the borrowers who are qualified with the 6 months deferment in the first place on 1.4.2020[13].

Q14. Please give me an illustration for repayment of Hire Purchase loan (HP loan) after the 6 months deferment.

Answer:

a. Based on the recent announcement by Ministry of Finance, there is no change to the monthly instalment of HP Loan (conventional and Shariah financing) when a borrower starts repaying the monthly instalment after the deferment period. Hence, the borrowers shall pay as per usual according to their respectice HP agreement[14]. The illustration are as follows:-

Monthly installment before deferment Monthly instalment after deferment
RM1,133 RM1,133- no change

If tenure post-deferment extended 6 more months

b. This illustration is based on a fixed rate Hire Purchase loan, with these assumptions:

  1. Loan/financing amount – RM90,000, flat interest/profit rate-4%
  2. Original tenure – 9 years, borrower/customer has repaid for 3 years
  3. Outstanding loan/financing amount before and after deferment period – RM81,600
  4. No additional interest/profit charged during deferment

Q15. What about housing loan, what if I choose not to prolong my loan tenure post deferment?

Answer:

a. Your housing payment with no extension of loan tenure is as follows[15]:-

Monthly instalment before deferment Monthly instalment after deferment

 

RM1,438 RM1,483

(RM45 increase)

b. The above illustration of a conventional housing loan is based on these assumptions:

  1. No extension of tenure after deferment period
  2. Loan amount – RM300,000
  3. Interest rate – 4.6% p.a. (interest not compounded during deferment period)
  4. Original tenure – 35 years, and borrower has repaid for 5 years
  5. Principal and interest payments suspended during deferment period
  6. Outstanding principal before deferment period – RM280,585
  7. Outstanding amount post-deferment to be repaid within 29.5 years = RM287,038

FOOTNOTES 

[1] https://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=5018&lang=en

[2], [3], [4], [5], [6], [7], [8], [9], [10], [11], [12] https://www.bnm.gov.my/index.php?rp=en_faqcovid19loan

[13] https://www.bnm.gov.my/index.php?rp=en_faqcovid19loansupp

[14] https://www1.treasury.gov.my/index.php/galeri-aktiviti/siaran-media/item/6285-siaran-media-tiada-caj-tambahan-atas-bayaran-ansuran-perjanjian-sewa-beli-konvensional-dan-shariah.html

[15] https://www.bnm.gov.my/index.php?rp=en_faqcovid19loansupp

THIS FAQ IS PREPARED AND PUBLISHED BY GENERAL LITIGATION, CORPORATE INSOLVENCY AND APPELLATE DEPARTMENT OF THE DISPUTES RESOLUTION OF MESSRS GAN & ZUL, ADVOCATES & SOLICITORS.
Prepared by:

Ben Lee Kam Foo (Partner)
Head of Dispute Resolution
Arbitrator & Adjudicator
Fellow of ADR, AIAC
Cross Border Taxation Planning

Victor Pang Chee Siong (Associate)
General Disputes Resolution
Tax advisory and Disputes Division
Contractual, Land and Commercial Disputes
Succession and Estate Distribution

Gan & Zul is an established legal firm in Malaysia which consists of experienced litigation lawyers. Our firm provides a wide spectrum of legal services covering various aspects of laws includes dispute resolution, debt recovery, land, bankruptcy, insolvency and corporate dispute. We are also a firm construction lawyers based in Kuala Lumpur.
If you have any queries or require additional information, kindly email us at kul.litigation@ganzul.com or call us at 03-2242 3836

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