KUALA LUMPUR: The Federation of Chinese Associations Malaysia (Huazong) has urged the government, through the Bank Negara, to give interest-free finance, besides loan moratorium, to economic sectors and low-income groups worst-hit by the Covid-19 pandemic.
He cited for example, operators of the tourism and cinema industries, as well as those in the low-income group (B40), whose number has expanded due to the pandemic, should be given special consideration for interest-free finance besides loan moratorium for their existing loans.
Goh who is also President of the Federation of Chinese Associations Sabah (FCAS) said this in a statement issued today. He was responding to statement by Bank Negara Malaysia (BNM) Governor Datuk Nor Shamsiah Mohd Yunus that, waiving the accrued interest payment on all individual and business loans will have significant long-term consequences for banks, especially when the interest income accounts for 80 per cent of banks’ revenues.
She revealed that the total individual and small and medium enterprises (SMEs) loans that are eligible for automatic opt-in moratorium amounts to about RM1.4 trillion – or 73 per cent of the total bank system’s loans. As such, automatic opt-in moratorium which was implemented during the Movement Control Order (MCO) period, previously, has now been changed to targeted moratorium, and the borrowers are required to apply for it.
“Similarly, banks should adopt a more considerate policy, by providing interest-free finance to successful applicants of the loan moratorium, especially those from the worse-hit economic sectors and those from the low-income group, besides waving the Compounded Interest Charges and Late Payment Charges for their existing loans,” he said.
He noted that, the Department of Statistics Malaysia (DOSM) recently revealed that the pandemic had significantly affected the structure of household groups, with 20% of households from the middle 40% income group (M40) with income between RM4,850 and RM10,959 having moved to the bottom 40% income group (B40).
“We strongly propose banks to provide interest-free finance besides automatic loan moratorium to borrowers from the low-income group,” he proposed.
He said, while he realised banks depended on interest income to sustain their operations, they should nonetheless strive to provide stronger support and assistance to their clients, during this devastating time, so that they could get through it intact.
Furthermore, despite the pandemic, most of the banks reportedly continued to make profits over the past one year.
He opined that, if strategically executed, extension of targeted loan moratorium and interest-free finance by the banks would not adversely affect their capital buffer or stop future loan applications, or affect market confidence towards the banks. Hence, their profits will continue to be safeguarded.
He reiterated that, besides extending loan moratorium, the government should also through the banks continue to provide low interest or interest-free financing to affected small-and-medium enterprises (SMEs), the self-employed, and the low-income group, to help them to survive this pandemic.
He underscored that the banking sector should emulate the government’s caring policy, to provide targeted assistance and support to needy businesses and individuals during this trying time.
He was convinced that Malaysia and its banking sector have sufficient reserves to deal with the economic impact of the pandemic.
“It is necessary that our nation and the banks must stand by the businesses and the people during this devastating time of fighting the pandemic,” he concluded.
