In an interesting twist of events, Finance Minister Tengku Dato’ Sri Zafrul Abdul Aziz has announced hugely positive news for Malaysians: interest will no longer accrue on hire purchase loans and fixed rate Islamic financing. This effectively reverses the announcement made by the Association of Banks in Malaysia (ABM) last week, which enabled interest accrual on the two credit facilities.
On 30 April, press releases by both Bank Negara Malaysia (BNM) and ABM caused a huge uproar among Malaysians, who saw the statements as a reversal of the original terms of the 6-month bank loan moratorium. While home loan terms were fairly straight forward and interest accrual was universally accepted, fixed-rate loans and financing such as hire purchase agreements technically cannot accrue interest due to the nature of the loan/financing. Shortly after the press releases were posted, banks began informing customers of the effects of interest accrual to their existing loans/financing, even when they were previously told there would be zero interest accrual during the moratorium period.
In light of the uproar among Malaysians who were already struggling to cope financially with the effects of Covid-19, Finance Minister Tengku Dato’ Sri Zafrul stated that his ministry would attempt to discuss the matter with both ABM and BNM, to reach “the right decision for the benefit of the rakyat.”
Today, the minister confirmed the good news – albeit slightly vaguely. In his statement, Tengku Zafrul confirmed that there will be “no additional charges” on hire purchase agreements (both conventional and Shariah).
“An agreement has been reached to confirm that the total monthly instalment will not change for hire purchase borrowers (conventional and Shariah) throughout the tenure.
It also means that there will be no additional charges imposed during the moratorium period.
As such, the borrower need only continue instalment payment as usual based on the existing agreement with their respective banks, and include an extra 6 months in the tenure if they choose to opt in to the moratorium. Additional information can be obtained from the respective banks.”
While the Malay-language statement initially left some doubts on the interpretation of “additional charges”, we can confirm that with this statement, there will be no interest accrual for hire purchase/car loans as well as fixed-rate financing during the moratorium period, effectively nullifying the ABM press release on 30 April.
However, the “operationalisation” of the moratorium agreement, in which the borrower must inform the bank of their decision to opt in or out of the moratorium (as it is no longer automatic), will continue. Banks must get in touch with borrowers and provide an easy solution for them to make their decisions.
(Source: Tengku Dato’ Sri Zafrul Abdul Aziz (Twitter))