Individuals & SMEs now automatically qualify for 6-month loan deferment. Here’s all your questions answered

*This article was updated on 29 March 2020.

On 25th March 2020, Prime Minister Tan Sri Muhyiddin Yassin announced that Bank Negara Malaysia (BNM) has introduced a loan deferment package to assist Malaysian consumers who are affected by the COVID 19 outbreak. 

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Just last week, various banks across Malaysia launched special financial relief programmes which consist of temporary loan instalment deferments or moratorium periods. This is to help ease the burden of borrowers who are in a financial bind due to the Coronavirus outbreak.

Taking it a step further to assist those adversely affected by COVID 19, Malaysia’s Central Bank, BNM released a statement earlier today which revealed bigger benefits for the rakyat in terms of a loan deferment package. In summary, all individual and SME loan borrowers (who fit certain requirements) are eligible for an automatic 6-month loan deferment. Borrowers will need not apply for said loan moratorium, which begins on 1 April 2020. This 6-month loan holiday means that you will only start paying for your instalments again in October 2020.

Besides that there is also financial relief provided for credit card holders – banking institutions will offer to convert the outstanding balances into a 3-year term loan with reduced interest rates to help borrowers better manage their debt (more explained below).

This move is timely indeed considering the Movement Control Order (MCO) extension which was also just announced by our PM – Malaysia will be extending the MCO by two weeks until 14 April 2020 to contain the further spread of COVID 19.

Do note that individuals and SMEs who do not wish to leverage on the 6-month loan moratorium can continue with their current repayment structures. Meanwhile, corporations who wish to defer or restructure their loans/financing repayments in order to preserve jobs can submit a request to BNM.

Bank Negara Malaysia has released a complete FAQ for the Loan/Financing Deferment Measure for Individuals & SMEs. Check out the complete details below:

What is a deferment of loan or financing repayment?

It is a temporary deferment or suspension of loan/financing repayment obligation (principal and interest) for a limited period of time, during which borrowers with a loan/financing product that meet the conditions do not need to make any repayment, and no late payment charges or penalties will be imposed.

It is important to note that the interest/profit will continue to accrue on loan/financing repayments that are deferred and borrowers will need to honour the deferred repayments in the future.

List of banks that won’t compound interest during the 6-month loan suspension

Shortly after BNM’s announcement, several major banks in Malaysia have thrown in their support to assist financially-stricken consumers by confirming that they will not be compounding interest and profit respectively for mortgages and SME loans/financing products during the moratorium period. As of 29 March 2020, these banks include:

1. RHB Bank
2. Alliance Bank
3. Public Bank
4. Maybank
5. OCBC Bank
6. HSBC Malaysia
7. Ambank
8. Affin Bank
9. Standard Chartered Bank
10. CIMB
11. UOB Bank

FOR INDIVIDUALS & SMEs

Which loan/financing product qualifies for the deferment?

For individuals and small and medium enterprises (SMEs), the deferment in conventional loans or Islamic financing repayment obligations (except credit cards) are automatically effected by banks and development financial institutions (DFIs) if they meet these criteria:
• loan/financing are not in arrears exceeding 90 days as at 1 April 2020; and
• is denominated in Malaysian Ringgit.

The package also applies to newly approved/ disbursed loans (all loans outstanding as at 1 April) Besides small businesses, the loan deferment offering is also available for those working in the tourism industry.

Can I ask for more than 6 months of deferment?

The answer is No – The deferment is only for 6 months. Borrowers can contact their respective bank if they require a longer deferment period.

If I opt for the deferment, will my CCRIS records be adversely affected?

No, it won’t be impacted. However, interest/profit will continue to accrue on loan/financing repayments that are deferred and borrowers/customers will need to honour the deferred repayments in the future.

loan-malaysia-bnm

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Borrowers are advised to contact their banking institutions to discuss the options available to resume repayments after the deferment period.

RELATED: What is CTOS and how it affects a home loan approval?

Do I need to apply for the deferment?

No, the deferment is automatic. All individual and SME loans/financings (excluding credit cards) which meet the criteria will qualify by default for the
deferment.

Can I qualify if my loan is in default? Can loans under rescheduling and restructuring (R&R) program be eligible for the deferment package?

Loans/financing accounts that are already more than 90 days in arrears, will not qualify for the moratorium. Borrowers are advised to approach their banks to seek assistance. Loans/financing under the R&R program is eligible for the deferment subject to meeting the criteria.

How is the deferment package different from the other loan/financing moratoriums announced by banks recently?

Banks and development financial institutions (DFIs) have been proactive in responding to the needs of their customers with the various moratoriums, rescheduling and restructuring packages offered to assist affected borrowers. Borrowers that have accepted assistance from banks and DFIs to reschedule and restructure their loans/financing can opt-out of such arrangement if they wish to do so.

Which banks offer this deferment package?

All licensed banks, licensed Islamic banks and prescribed development financial institutions (DFIs) regulated by BNM will offer this deferment flexibility. Borrowers that meet the eligibility criteria can avail themselves to this flexibility automatically.

How do I know if my bank has enrolled my loan/financing into the deferment package? 

banknegaramalaysia-loan

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Banking institutions will provide individuals and SME customers with adequate information that their loan/financing repayments have been deferred under this scheme. Such information may be provided through a general advisory issued to customers through appropriate channels, and/or published on banking institutions’ websites.

MORE: Latest from BNM: Base Rate, BLR & Effective Lending Rates for banks in Malaysia

I want to continue with my loan/financing repayments. How do I opt-out of the automatic deferment package?

Contact your bank if you wish to opt-out of the automatic deferment package by responding to the notification sent by the bank or continue to make timely and full repayments. This is because the bank will automatically stop your repayments if you do not respond to their notification and inform them accordingly.

Will I be charged additional interest on the repayment amount that is deferred by 6 months during the period?

For conventional loans, interest will continue to be charged on the outstanding balance comprising of both principal and interest portion (i.e. compounded) during the moratorium period.

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.

Banks are however not allowed to impose late penalty charges on the deferred amount. In other words, the loan/financing repayment is just deferred by
6 months.

How does being in the deferment package affect my interest payments after the 6- month period? Is there an increase in monthly payments, or longer tenure?

Borrowers are advised to contact their banking institutions to discuss the suitable workout plans to repay the principal and interest accrued during the deferment period. This may include higher subsequent instalment amount or an extension of the loan/financing tenure.

I have a loan/financing which is automatically deducted from my salary. Do I qualify for the deferment?

Yes. Please inform your company to stop the salary deduction if you wish to have your loan/financing repayments deferred. You should also contact your bank to inform them accordingly.

Would my loans with other non-bank credit providers qualify for this deferment package?

No, this is only applicable to loans or financing offered by financial institutions regulated by Bank Negara Malaysia, namely banks and development financial institutions.

FOR CREDIT CARD HOLDERS

I have two credit cards with big amounts outstanding, and I was retrenched in January. I have not been able to meet my credit card monthly obligations since January – will I qualify for the conversion of these outstanding balances into term loans/financing? 

Woman hand paying on line with credit card

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If you have been unable to meet the minimum monthly repayment on your credit card consecutively for the last 3 months, your card issuer will convert the outstanding balance into a term loan of not more than 3 years at an effective interest of not more than 13% per annum.

I heard that banks will now provide automatic conversion of credit card balances into term loans/financing, but I have a monthly salary of about RM5,500. Will I qualify for this conversion package by banks?

Banks will convert the outstanding credit card balances of cardholders who are unable to meet the minimum monthly repayment consecutively for the last 3 months, regardless of the income levels of the cardholders.

Can credit cardholders who have converted their card balances into a term loan/ financing immediately ask for 6 months deferment of loan or financing repayment package?

Yes, they can. Loan/financing repayment resumes after the deferment period.

If my credit card outstanding balances are converted to a term loan/financing, can I still use my credit card?

Yes, you can continue to use the credit card up to the remaining credit limit after taking into account the balance converted into a term loan/financing. The outstanding balance converted into the term loan/financing is treated as part of the credit card limit.

In addition, the monthly term loan/financing instalments will then form part of the minimum monthly repayment amount on the credit card.

FOR CORPORATIONS

If a corporate opts in for a loan or financing repayment deferment package, would it still be able to get new financing from banks?

Yes. The credit decisions of financial institutions are subject to their respective internal credit policies and assessment.

As a corporate, what would be the criteria to opt-in?

Unlike individuals and SME borrowers, corporate customers should refer to their banks for the deferment and rescheduling and restructuring of their loans/financing.
In addition, these loans/financing must meet the following criteria:
• not in arrears exceeding 90 days as at 1 April 2020; and
• denominated in Malaysian Ringgit.

For more knowledge on mortgages, read:  What to know about Base Rate (BR), Base Lending Rate (BLR) & Spread Rate when selecting a home loan?

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