Banks offer non-compounding interest on loans during moratorium

KUALA LUMPUR: Several banks have announced that they will not be compounding interest for its customers during the six-month moratorium period announced recently by Bank Negara Malaysia (BNM).

RHB Banking Group, Public Bank Bhd, Malayan Banking Bhd (Maybank), CIMB Bank Bhd, OCBC Bank (M) Bhd, HSBC Malaysia, AmBank Group, Affin Bank Bhd, United Overseas Bank (Malaysia) Bhd and Citi Malaysia are among the banks that have announced non compounded interest or profit during moratorium period for retail and SME customers.

RHB Banking Group is the first local bank to announce its offer. The bank announced that it will not be compounding interest during the six-months repayment deferment for banking facilities.

This will, however, be applicable to retail and SME customers only and will take effect from April 1, 2020. For Islamic financing, RHB will continue to observe the principle of no compounding of profit.

RHB said the Moratorium will apply automatically to all RHB Bank and RHB Islamic Retail and SME customers, with the exception of loans/financing facilities that are in arrears exceeding 90 days as at April 1.

For credit card facilities, RHB said customers may request to convert the outstanding balances into a 3-year term loan with reduced interest rates.

Maybank has also announced that it will not be compounding interest for all individual, SME and non-retail/corporate customers loan facilities which are eligible for the 6-month moratorium period.

Maybank said the eligible products under the automatic scheme for retail and SME clients include personal, mortgage, ASB, education and SME loans. Fixed-rate hire purchase loans already do not have compounding interest.

“All retail and SME customers do not need to apply for the moratorium as it will be automatically applied to all eligible loans and financing.

“For all Islamic financing facilities under the group, profit rates are already not compounded in line with Shariah principles. Eligible non-retail/corporate customers will, ” Maybank said.

Public Bank is providing a six-month moratorium for the monthly instalment payments of loans for all eligible individual and business customers, with no compounded interest during this deferment period from April 1 to Sept 30.

For Islamic financing, profit will continue to accrue on the outstanding principal amount. Such profit will not be compounded as well, in line with Shariah principles.

Meanwhile, CIMB Bank Bhd and CIMB Islamic Bank Bhd announced that all individual and SME customers will be automatically enrolled for a moratorium on loan/ financing repayments for a six-month period from April 1 to Sept 30.

The moratorium is applicable to all Malaysian Ringgit-denominated loans/ financings held by eligible customers that have not been in arrears for more than 90 days as at April 1.

For individual customers, eligible Islamic and conventional products under this moratorium include ASB financing, home financing, auto financing and personal financing (express cash, cash plus loan and Awam-i) and for SME customers, the moratorium applies to all existing term loans/ financings and industrial hire purchase.

CIMB said interest/ profit will continue to accrue on loan/financing repayments that are deferred, and customers will need to honour the deferred repayments in the future.

It added that interest on conventional loans will not be compounded during the moratorium period.

The bank said for Islamic financing, the profit will continue to be accrued during the moratorium period. Profit will not be compounded in line with Shariah principles. Loan/ financing repayment resumes after the moratorium.

HSBC Malaysia said both HSBC Bank Malaysia Bhd and HSBC Amanah Malaysia Bhd are offering automatic moratorium for HSBC Malaysia’s individual and SME customers, whereas corporate customers can choose to opt-in.

OCBC Bank (M) Bhd and its subsidiary OCBC Al-Amin Bank Berhad will not be compounding interest and profit respectively for its mortgages and SME loans/financing during the 6-month moratorium period.

OCBC Bank CEO Datuk Ong Eng Bin said this would apply to both mortgage and SME customers.

“These are both trying and uncertain times. So we are seeking to alleviate our customers’ burdens as much as we can. Although compounding might be allowed for, we have elected not to do so in light of the pressing circumstances. We hope our customers will continue to exercise prudence in their spending during these challenging times, ” he said.

AmBank and AmBank Islamic will be offering an automatic payment deferment for loans and financing for all individuals and SME customers.

AmBank said the offer is for a period of six months from April 1. Customers who wish to opt out from the automatic payment deferment may simply continue with their regular monthly instalment payments.

“Keeping in mind the interest of our customers, many of whom are facing uncertainties due to this pandemic, AmBank and AmBank Islamic will not be compounding the interest or profit on loans and financing during this period, ” it said.

The bank is also offering an option to customers with credit card facilities to convert their outstanding balances into a term loan/financing for a tenure of 36 months at 13% per annum, effective April 1.

Affin Bank and Affin Islamic Bank Bhd are offering their retail customers and SME clients non-compounding interests or profit for six months, for term loan and term financing, during the moratorium for financing facilities due to the Covid-19 outbreak in the country.

For all Islamic financing facilities under Affin Islamic, profit rates are already not compounded in line with Shariah principles.

Meanwhile, UOB Malaysia said that in support of the financial relief measures it would not compound interest on loans and mortgages for all eligible individual and SME customers during the six-month moratorium period.

"For its Islamic banking customers, UOB Malaysia will continue to observe the Shariah principle of not compounding profit on Islamic financing facilities.

"All individual and SME customers do not need to apply as they automatically qualify under Bank Negara’s relief measures. Their loans and mortgages will not be charged compounded interest during the moratorium period.

"This means interest/profit accrued during the period will not be charged interest and the bank will not impose late penalty charges on the deferred amount," it said.

Citi Malaysia said individual and commercial banking SME customers will have an automatic moratorium on loan/financing repayments and payments excluding credit card balances for a period of 6 months beginning April 1.

"Citi Malaysia will not compound interest for mortgage and personal loans. For Islamic home financing, profit accrued on the outstanding principal amount will not be compounded in line with Shariah principles.

"The automatic moratorium is applicable to loans or financing that are not in arrears for more than 90 days as at April 1 and denominated in Malaysian ringgit. Customers should approach Citi Malaysia to discuss their repayment affordability after the moratorium period. Customers can also opt out of the moratorium should they wish to and continue with their current repayment or payment terms," it said.

It added that credit card customers with outstanding card balances can apply to convert their balances into a 3-year term loan at an effective interest rate of up to 13% per annum from April 1 to Dec 31, 2020. Card customers who are unable to meet the minimum monthly repayments for the last three months will have their credit card balances automatically converted into term loans once from April 1 to Dec 31.

"Citi Commercial Banking SME customers will continue to have non-compounded interest on their term loans and trade bills during the moratorium. For other corporates affected by Covid-19, Citi Malaysia will review any moratorium request on a case-by-case basis," Citi said.

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RHB , Maybank , Public Bank , CIMB , UOB , OCBC , Citi , moratorium , Covid-19


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