Finance minister Tengku Datuk Seri Zafrul Abdul Aziz has waded into the issue regarding banks charging interest on paused hire purchase (HP) loan payments (or profit from fixed-rate Islamic financing) in the government announced six-month moratorium to ease financial burden and improve cashflow in these difficult times.
Before we go into what the former top banker turned cabinet member said on his Facebook page, here’s a recap on the issue. This week, it was announced that HP loans (we’ll use the term to cover fixed-rate Islamic financing as well) will come with additional interest charges after the six-month moratorium effective from April 1 to September 30.
Basically, if you choose to take up the half-year payment pause, it won’t be interest free, and you’ll have to pay back the interest later. The confusion, and anger for some, is that many expected the six-month payment moratorium to incur no interest, just a pause and nothing else.
A Bank Negara Malaysia (BNM) FAQ released on March 27 indicated that there would be no additional interest charged on HP loans. This mention regarding HP loans was subsequently dropped in an amended FAQ dated April 21, and mention of interest being charged emerged. Refer to the screenshots to compare.
Basically, there will no free lunch now, so to speak, but Tengku Zafrul is requesting the banks to consider abolishing the accrued interest for HP loans for the six months.
“Lately, there has been confusion regarding the interest or profit rate charged during the six-month moratorium scheme offered by banks. Among the causes of this confusion are various sources that delivered inaccurate information. With that, BNM on May 1 published an FAQ document that has been updated. BNM has also conducted a press conference to clarify the confusion faced by borrowers,” he said today on his Facebook page, translated into English here.
“For your information, there are indeed banks that offered loan moratoriums without charging accrued interest or compounded interest. However, it does not cover all loan products. Also, every bank has its own approach regarding charging interest in the moratorium period.
“Taking into account that there’s a possibility for it to be implemented, and after considering the rakyat’s request, I would like to suggest that all financial institutions, especially those involved in the moratorium, consider abolishing the accrued interest (for HP loans) or profit (for fixed-rate Islamic financing) for the six-month moratorium period,” he added.
The minister acknowledged that this matter is under the purview of BNM, but said that the finance ministry has started proactive steps to find a solution for the issue via discussions with BNM and the banks, to find the best solution for the people.
“We at the finance ministry are ready to work together with BNM and the banking sector to ensure the implementation of this call. The government is always sensitive towards the needs of the rakyat, especially those from the B40 and M40, and is taking this matter seriously. In such a challenging economic situation caused by the Covid-19 pandemic, I hope that this view will be given fair consideration by BNM and the financial institutions.
“I am confident that this move will bring positive impact to the rakyat,” he ended.
Yesterday, BNM released a statement acknowledging the public’s confusion. “We sincerely regret any confusion and anxiety that this announcement may have caused. The deferment of loan repayments is meant to ease cash flows for borrowers/customers affected by the Covid-19 pandemic. This intent remains the same. The confusion arises because of the misperception that the repayment amounts for a HP loan cannot be changed,” BNM said.
The central bank added that the misperception came about due to an illustration provided in an initial version of its FAQ, “where certain assumptions and caveats were made.” BNM said that it had later removed the illustration when the banks provided their own.
Earlier, we’ve also seen a few banks confirm these “assumptions” of monthly instalments staying the same after the moratorium period, in both their own FAQs and official responses to customer queries. We were among those who reported this original scenario, based directly on the information available, which – at the time – was accurate.
Yesterday, BNM also released an example of a RM50,000 HP loan with a remaining tenure of five years, on a fixed interest of 2.71% per annum. The original monthly instalment was RM712. Should the borrower opt for the payment pause, the monthly instalment will be RM731 in October once the moratorium ends. This is an increase of 2%, or RM19 a month.
Read what BNM said and the latest official status on the issue here.
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I have 2 car HP loans and 1 housing loan here. To me I still pay my monthly commitments as usual even if they give 6 months interest free. Why? Cause I know this is not possible for the banks. Before people start criticising me, I do not work in the bank but as a business owner imagine you have a big chunk of your cashflow stopped for 6 months, and imagine if your profits are also gone for that six months? I can tell you your business will confirm get into cashflow problems and get bankrupt. This is simply not feasible! I only blame the government for syok sendiri announcing this 6-mth moratorium without consulting the banks and the banks have to be the one to pick up the pieces
Very true dude. this the government syok sendiri.
That is if you look from business perspective only, now factor in the overall economic situation, both business feasibility and people purchasing power. If you let the virus took over the country, that also will hit economy negatively & dangerously.
Whoever the government is, this is not as easy as solving 2000pcs puzzles. There’s so many variables need to take into account, and so many variables that could only be controlled indirectly, also unpredictable. Just let them sit together with BNM and come out with best solution. At least I’ve seen the peoples working at Unit Perancang Ekonomi (EPU) and BNM, they’re much far smarter than the minister itself. Let’s just hope the minister listened to them.
Whoever runs the government right now, are still doing a better job than the last Finance Minister who prefers to bury his head in Penang soil dug up from his PTMP crony master project, when the virus effects was spreading around South East Asia.
Like how the double standard law, all of us marhaen clearly saw … VVIP & minister go jalan2 breached MCO, no isu NFA … Rakyat marhaen, ibu keluar jap beli susu baby… jel 30hari. this Finance Minister is ex top banker, obvious he #bankerjagaBanker. the fail corrupted 61year rejim back to suck, all High & dry.
Ministers are allowed to go patrolling as they are wakil rakyat. This shows their concerns for us. How many Pakatan wakil rakyats you see during MCO? NONE! That shows how little they cared for us.
Okla tu. Nama pun wakil rakyat. Kalau seorang wakil 10,000 orang keluar bagusla tu. takyah 10,000 orang keluar dan dijangkiti covid virus. Syukur masih ada wakil rakyat Prihatin Negara. Kalau PH… hampeh jangan haraplah! Masa PRU baruje nampak batang hidung mereka.
If LGE was gauged by him lining his pockets during their short reign, he would be considered as the best FM we ever had, probably even the best FM the world has ever seen.
Bank will never be at the losing end. Just look at the agreements you signed with them. Its all about protecting them Whatever rights you supposed to have are at their discretions.
Inb4 Bank staff 12-24 month Bonus next year.
After they had sacked most of their staff ya.
Totally agree with you. If the accrued interest is abolished, the Rich who can afford to pay will just take up the moratorium, put the money in FD for 5 years and earn the 3%+ interest and will end up better off with extra few thousands ringgit. This is not an equitable way of helping the Rakyat.
very true but for Most Malaysian, this is a great deal when government announce for the deferment and BNM come out a statement where Malaysian though is totally interest free for the deferred loan. After 1 month, a shocking news by BNM stated there will be interest charged during these period.
As Malaysian, we feel like kena TRAP either by government, by Bank Negara or by both parties due to communication error.
the feel is just like Government Sayang you confortable for a month and suddenly A BIG SLAP to u to gain the MOST pain.
We are very lucky we now have a Finance Minister that cares about us. If it was the previous one, you jump from Penang Bridge because of debts also he don’t care as long his salary is untouched.
I was filled with maruah when they took over… But now alredy lost my patience, hope and confidence in them.. More financial burden to rakyat and negatif cashflow in this difficult times. This bunch of clowns and Doraemon, not worthy to lead our country … Severe lack of leadership and proper coordination, gonna be tough long ride for malaysia
Be careful what you wish for, lest it come true!
No need to wish / dream anymore.The truth is right in front of everyone. FM/BNM/Private Bank r not running the same way. In another word, useless FM can go screw himself somewhere else. Especially his aid package won’t work on 70% on small medium enterprise.. good luck everyone..
Becoz under PN now there is such thing called DEMOCRACY and they can act independently, it doesn’t have to mean BNM must follow Finance Minister’s orders. This unlike the dictatorship during PH rule when the real king is LGE.
All over the world effected…but Malaysia come out better than others even the super power…think about that
What consider? Stop siding the greedy banks! Auto financing works on FIXED interest rate. Period!
Asking them to wait 6 mths will not die. Many other industries are actually more adversely affected! Many companies are closing down! Look at hotels!
This is the time the nation needs ethical businesses to help them go through difficulties. This is the time when government actually works and helps the people!
Government actually pushes away responsibilities to business owners by announcing 4th May leniency. This incident also shows how incapable the current illegitimate government is.
There is already fixed interest earned and adding interest on top of it due to an emergency/desparate situation that nobody wishes to have is just wrong!
What is the banks’ social responsibility towards the people in difficult time and what’s the government responsibility during crisis time?
And our Finance Minister supposed to be the smartest and most capabled one in the Cabinet. Could imagine the level of capability and leadership, or lack thereof of the rest of the Ministers. Air suam, doraemon or not….
That so? If LGE was the benchmark for PH, I can see why they didn’t last very long.
But he did an outstanding job… at lining his pockets. None of our ex FM has done such an outstanding job at robbing our country in such a short time that he did.
Imma pulling all the strings, Maluapo kakahka
Whoever the government is, this is not as easy as solving 2000pcs puzzles. There’s so many variables need to take into account, and so many variables that could only be controlled indirectly, also unpredictable. Just let them sit together with BNM and come out with best solution. At least I’ve seen the peoples working at Unit Perancang Ekonomi (EPU) and BNM, they’re far much smarter than the minister itself. Let’s just hope the minister listened to them.
EPU, BNM, Khazanah, PNB, Petronas, etc, HAD (I emphasize again: HAD) smart and capabled people working in them but now they are filled with PH-appointed craps that normally wouldn’t make it past their doors. So we can see decisions from them atm would weird, controversial, and might sometimes be downright stupid, until PN can clean house and get rid of all these craps posing in these government entities.
It should be the other way, just look at those jokes, air suam to kill virus, doraemon voice, meeting with 500 country, are these not weird enough
I think he is trying to achieve his KPI, not MOF’s one but his CIMB’s KPI.
Mr Finance Minister, maybe you should start with the bank you once lead. ask them to waive the interest
Mr Medic, you should stick to your own profession and not meddle in banking. FYI the banks reports to BNM, and not to Finance Minister. That is what the previous Minister learnt when he tried to get money from banks to fund his PTMP master crony project.
Mr Hafiz Hisham, my profession doesn’t have anything to do with my request to waive the interest. I am in no way meddling in banking sector. It doesnt matter which finance minister, all it matters the interest is waived. Kalau jadi kucing cantik tapi tak pandai tangkap tikus pun tak guna bro
Regardless of your profession, if you go make a request to manager in your company that is not relevant to you, did you think they will listen to you? Hah!
As @Hafiz mentioned, banks report to BNM. If you want to put the blame, do it to BNM. Our Finance Minister is trying his best to convince BNM not to impose the interest levy if you cared to read the article here.
Mantap tu bro. Some ppl just menten blinded allegiance… Blinded by u know what$
Even if someone willingly opt for deferment and pay for the interest, the bank will only get it later after the moratorium. No profit or bad cashflow? It is not they going to get it now. It make no differences. Also, bank had actually published the thing officially on their website before this. Some people just slap on their on faces. Maybe karma is more real than all those liars. We shall wait. Have you read the prediction what might come this year? God will show us. What happen to human nowadays?
For the banks, it will be a loss for the accrued interest forgone as banks incur interest cost for the money they raised to give out as HP loans or extend the HP loans, e.g interest will still need to be paid to depositors or money they raise during this moratorium period.
No. This was BNM decision, it didn’t come from PN.
This may be just wayang kulit only….
i thought you are the Finance minister…
and BNM is you to execute the nation objectives…
“it was never about the money but the principle behind it” thus will never undermine anyone even if the amount is small. The issue too me should be the price of the car and the fixed nature of the loan which “taxes” people at later years when needed most.
Is the loan taxing ppl now when jobs are uncertain or later when the economy is more stable and ppl have stable jobs?
Actually, in a HP, the bank would have made its interest profits for the first few years. If you have a 7 year loan, you will notice that at the end of 5 years, your principal balance is still high. So the maths points towards the bank making more money on the same loan. Everyone has been affected with many with zero income. If you have the money to pay back, so does the bank… the millions in income should sustain them for the time being over a period of time. That is all the ordinary folks would hope for. A break without being taken advantage of. We are all in this and together we ride out.
Win win situation. Just charge 50% discount on the compound interest. Like some all those tadika nursery and school buses did
It’s accrued interest, there is no compound interest being charged
Banks will never be at the losing end even if there are no interest charged during the 6 months moratorium.
That’s because banks still has other incomes and doesn’t only rely on HP.
Take for example the housing loan. For the 6 months moratorium, they will be charging interest so from there alone they are making a huge chunk of profit.
Let’s say for the worse case scenario the banks really unable to to survive due to HP 6 months moratorium (which all of us knows that its quite the impossible lah) the government will bail them out the first thing.
Its been known that governments from all around the world will automatically bail out the banks the moment banks announce that they will go bankrupt.
So how the hell banks won’t be able to survive a merely 6 months moratorium as some commented at the comment section? Use facts to talk before commenting please.
in the first place, i didn’t vote for a banker to be a minister. an ex-banker will definitely lookout for benefit of the banks rather than the citizens.
Wait … the emergency 250B budget is actually nothing?? Then what is it used for if not to cover the loan interest on behalf for 6 months? Else, why Govt announced syiok sendiri if govt is not paying up. In the end of the day, rakyat are the ones taking the words for it, and now rakyat are the ones having to absorb the interests charged by banks. All these empty promises by the govt, supposedly nobody is missed, Makcik Kiah or Ah Beng, or Muthusamy … yeah right. Nobody is missed and to be charged with interests for additional 6 months.
What, did you think you got RM1600 BPN cash, (yes CASH!!!) out of nowhere? No bro, that came from the RM250Billion budgeted. This is still better than empty promise Manifesto that went nowhere and its creators giving us 10001 reasons they cannot fulfill a single one that benefited the rakyat.
Not due to the government, and thank God for that. Imagine if our health minister was leading this crisis… ♀️