Bank Negara Malaysia (BNM) has announced a number of updates to provide some relief to those facing financial constraints due to the COVID-19 pandemic. Chief among these is the automatic deferment of individual and SME loans for a period of 6 months.
According to the country’s central bank, this move is designed to ease the cash flow of individuals and SMEs that are most likely to be affected by the ongoing pandemic. All conventional and Islamic banking institutions licensed by BNM will offer a deferment of all loans to individual customers as well as SME customers for a period of 6 months, with effect from 1 April 2020. The only two stipulations to this are that they are denominated in Malaysian Ringgit, and that the loans have not been in arrears for more than 90 days as at 1 April 2020.
In an FAQ released alongside the press release today, BNM stated that this deferment will be automatically applied to all loans that qualify based on the two stipulations above. This means that customers do not need to apply for the deferment, a marked difference to how it is currently where customers are asked to apply for the deferment – and the decision to approve to be at the discretion of the bank.
This automatic deferment will kick in from 1 April 2020, and customers who wish to defer their loans for a period of six months do not need to do anything. For those who wish to opt out of deferring their loans, they simply need to continue making timely repayment of their current loans or financing.
However, note that interest on the loan will still accrue during the period of deferment. For Islamic financing, profit will continue to accrue, but in line with Shariah principles, such profit will not be compounded.
Finally, Bank Negara also stressed that this automatic deferment is only for a period of six months. Customers who require a longer deferment period are advised to contact their respective banks. In addition, the moratorium only applies to individuals and SMEs – corporate borrowers or customers may request for a deferment from their respective banks.