PETALING JAYA: The Finance Ministry has been flagged for poor loan collection, some of which have been overdue for more than 40 years.
According to the Auditor-General’s Report Series 2/2026, the ministry collected only 5% of RM9.273bil in arrears last year.
"Overall, the collection of loan arrears was low, with only RM0.465bil, or 5%, of the arrears from the previous year successfully collected in 2025," read the report, tabled in Parliament on monday (Oct 5).
It added that as of the end of last year, loan arrears outstanding for more than six years amounted to RM5.024bil, or 62.1% of total arrears of RM8.084bil.
"The ineffective collection of loan arrears has necessitated loan restructuring as a recovery measure to help borrowers settle their repayments," it read.
In addition, new arrears amounting to RM16.15mil were recorded after loan restructuring, despite the loans having been restructured between one and five times.
The repayment period for restructured loans was extended by between 10 and 40 years, the report added.
As a result, the Auditor-General said the government lost the potential to recover outstanding principal balances amounting to RM127.33mil and had to forgo interest and late-payment interest revenue amounting to RM450.99mil as a result of write-offs.
"As at Dec 31, 2025, total arrears of RM8.084bil had been outstanding for between one and 45 years, involving 30 borrowers and 190 loans," the report found.
Of this amount, RM517mil comprised arrears less than one year old, RM1.083bil were between one and three years old, RM1.461bil were between three and six years old, and RM5.024bil were more than six years old, it added.
The highest amount of arrears was for loans outstanding for more than six years, totalling RM5.024bil, or 62.1% of total arrears.
The Auditor-General recommended that the ministry strengthen its monitoring and enforcement mechanisms for loan repayments by ensuring that follow-up action is taken or demand notices are issued promptly once arrears occur.
"Legal action should also be considered against borrowers who fail to comply with the agreements without reasonable justification," it said.
It also called for stricter financial capacity analyses and risk assessments before approving new loan disbursements or loan restructuring to minimise the government’s exposure to the risk of losses.
It said the loan restructuring process should be reviewed to ensure that it genuinely helps restore borrowers’ cash flow and improves their ability to repay the loans.
The ministry provided responses to the findings, including asking borrowers including Keretapi Tanah Melayu Bhd (KTMB) to submit a comprehensive financial recovery plan.
It also said Indah Water Konsortium’s loan restructuring application was pending approval, while Syarikat Perumahan Negara Berhad (SPNB) had agreed to restructuring and the ministry had prepared legal action against one borrower.
