Bank Negara grants 6-month payment deferment for all loans from April 1 – yes, your car loans are paused!

Bank Negara Malaysia (BNM) has ordered all banks to grant an automatic six-month moratorium (deferment) of all loan/financing repayments – including car loans (hire purchase agreements) – from April 1, 2020, with the exception of credit card balances. What this essentially means is that you do not have to pay your home loan and car loan monthly instalments for half a year starting April, and no action will be taken against you.

While BNM’s official announcement suggests borrowers will have to apply for the benefit, separate documents and a list of FAQs issued by BNM to banking and financial institutions stated that the moratorium would be applied automatically to individuals “likely to be most affected by Covid-19.”

This offer is applicable to performing loans, denominated in Malaysian ringgit, that have not been in arrears (owing) for more than 90 days as at April 1. Additionally, the interest/profit will continue to accrue on loan/financing repayments that are deferred, and borrowers will need to honour the deferred payments in the future. To make it clear, this isn’t a total waiver of payment, but a deferment.

As such, banking institutions must ensure that borrowers are sufficiently educated on the options available to them to resume their scheduled repayments once the deferment period ends. This includes coming up with suitable repayment plans that take into account the principal amount and interest accrued during the moratorium period (if applicable), as well as the repayment capacity of borrowers. Those that do not wish or need to avail of these flexibilities can choose to continue with their current repayment structures.

Bank Negara grants 6-month payment deferment for all loans from April 1 – yes, your car loans are paused!

In the case of outstanding credit card balances, banking institutions have been instructed to offer customers the option to convert outstanding amounts into a term loan with a tenure of up to three years and an effective interest rate of not more than 13% per annum.

For individuals that have been unable to meet the minimum monthly repayment of their credit card balances for the last three consecutive months, banking institutions can automatically convert those balances into term loans – this will be observed from April 1 until December 31, 2020.

The move is meant to ease the cash flow of individuals and SMEs that are likely to be affected financially by the Covid-19 pandemic. According to the Malaysian central bank, “banking institutions are well-positioned to do so, given the large financial buffers that have been built up over the years.” As at end January 2020, excess capital buffers above the minimum regulatory requirement stand at RM119.7 billion.

Recently, several banks have offered its customers the chance to defer loan repayments in light of the health crisis (with their own terms and conditions), but the new ruling issued by BNM technically supersedes those initiatives. The full list of FAQs related to the matter is posted below: