In his Malaysian Budget 2021 (Belanjawan 2021) speech, finance minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz confirmed that there would be no automatic moratorium extension, but there will be updates to the assistance that borrowers are eligible to receive.

As a recap, earlier this year, borrowers were given some relief when a blanket automatic loan moratorium was put into effect from April 1 until September 30. Following this, it was announced that the bank loan moratorium would be extended for a further three months, albeit with some changes and be known as the targeted repayment assistance (TRA) scheme from October 1 until December 30.

The scheme is aimed at helping those who have been affected by the Covid-19 pandemic, be it individuals who have lost their jobs or saw a drop in their income. Unlike the initial moratorium, borrowers won’t get a full deferment, but are able to restructure their loans instead.

This can either involve an extension of the loan tenure for a revised monthly instalment amount and possibly with interest as well, but the terms differ from banks to banks, with some offering further deferment. As always, check with your bank to ensure you are properly informed.

So, what’s new in the Budget then? Well, the TRA has been improved for borrowers in the B40 category (and SMEs) who have approved loan amounts of up to RM150,000. According to Malaysia’s department of statistics, those in the B40 category in 2019 have a monthly household income of under RM4,849.

These borrowers now have two assistance options to choose from, with the first involving a three-month repayment deferment. Option two doesn’t involve any repayment deferment, but a reduction of the instalment amount by half (50%) for six months.

Individuals who qualify for this new form of assistance – B40 and loan amount not more than RM150,000 – only need to contact their respective banks to choose one of the two options and perform the necessary documentation.

Zafrul also said the TRA will be extended for the M40 category, and the application process will be simplified, as they only need to make a self-declaration that their income has been affected to receive assistance. These initiatives will start from December this year, but it isn’t stated for until when.

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Previously, Bank Negara Malaysia (BNM) announced that the TRA will remain available for borrowers, including those who have previously declined it. As described by the central bank, borrowers would still be able to apply to their respective banks for targeted assistance throughout 2020 and into 2021 if their financial circumstances change in the future.

Therefore, even if you don’t qualify for the two options mentioned above, you will still be able to come forward and apply for repayment assistance with your bank, but do make sure you are furnished with complete information before making a decision.

It was clearly stated by BNM that banks are required to respond to such applications within five days for individual borrowers and within 14 days for SME borrowers – those that do not receive a response within these timeframes should contact BNMTELELINK.

During his speech, Zafrul also revealed that over 650,000 applications for repayment assistance have been received so far, with a 98% approval rate. Meanwhile, banks have reported that around 85% of borrowers who declined further assistance after the initial moratorium, have resumed repayments.