“While non-performing loans would naturally rise, what is more important is the ability of banks to absorb the impact, ” Bank Negara says in response to the potential impact on banks as the loan moratorium expires in September.
The central bank emphasises that the banks in Malaysia entered the pre-pandemic period with impairment levels at historical lows.
The quality of loan books were sound, given the prudent underwriting standards and risk management practices that have strengthened over the years.
In addition, adequate capital and liquidity buffers built up over the years are expected to help banks manage these current challenges.
Moving forward, Bank Negara says that banks stand ready to assist borrowers in a more targeted manner and have reached out to borrowers to offer various forms of repayment assistance including payment of interest only, lengthening of loan tenure and flexible repayments.
“Borrowers are encouraged to approach their banks early to discuss suitable repayment plans based on their financial circumstances.
“Borrowers can also approach the Credit Counselling and Debt Management Agency (AKPK) and Small Debt Resolution Scheme (SDRS), ” it adds.
Commenting on the six-month loan moratorium that took effect in April, Bank Negara says the measure has provided a massive cashflow relief to businesses and households.
It has helped households and businesses to weather through the lockdown period at the peak of the pandemic, which could have otherwise caused defaults and ‘financial scarring’ to even the viable borrowers.
“The focus now is to provide more targeted assistance to households and businesses based on their financial circumstances and challenges.
“This is also important to ensure that banks are able to support new lending activities as the economy starts to recover from the impact of the pandemic.
“With the easing of the movement control order, the resumption of economic activity and businesses will lend support to employment and income for individuals, ” the central bank believes. — By Ganeshwaran Kana
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