Banks guided by loan regulations

WE refer to the letter “All to protect the bottom line” (The Star, Aug 1). We would like to thank the writer for sharing his concerns. On behalf of our member banks, The Association of Banks in Malaysia (ABM) would like to reiterate that the commercial banks in Malaysia have and will continue to offer financing to eligible home buyers.

Banks are generally guided by the various regulations that govern responsible financing as well as the risk framework on assessment of affordability and credit prudency. In addition, each bank would have its own internal policies in relation to its risk appetite when evaluating loan applications.

As responsible lenders, the banks need to ensure that potential borrowers are not overly burdened by their debt repayment such that it would cause them to go into financial distress. This is especially true for the vulnerable income segment, i.e. the bottom 40% of households.

Please allow us to address the issues highlighted in the article.

1. “Auto-deducting a flat rate of RM1,000 for each housing loan applicant”

Based on feedback received from our member banks, it is not true that banks adopt the practice of “auto-deducting a flat rate of RM1,000 for each housing loan applicant under their so-called living expenses, regardless of the reported income of the applicants”. In fact, during the evaluation process, banks take into consideration the applicant’s debt service ratio (DSR), i.e. the level of borrowings as a percentage of income. Some banks have differentiated DSRs depending on income level to ensure sufficient buffers for expenditures and contingencies.

2 “Deliberately” approving loans at a lower margin

ABM member banks would ge­ne­rally approve housing loans based on the eligibility and capacity of the applicant. Banks are in the business of lending and financing will be extended to viable applicants. It would not be prudent for banks to approve higher margins if the income level of the applicant is not able to support the same.

3. Imposition of fixed deposit pledge as additional security

Based on feedback from member banks, we are not aware of any banks that currently require a fixed deposit pledge as security for housing loans.

4. Exclusion of overtime and other side income evidence not being taken into consideration for the sum of the loan being applied

Banks do not exclude overtime and other side income declaration in lieu of roping in a strong guaran­tor.

Banks are expected to assess and verify all information provi­ded by the customer to ensure that the loans approved are sustainable and that the applicants can viably service their loans.

For more information, members of the public are welcome to contact us at our ABMConnect hotline by dialling 1-300-88-9980, or through eABMConnect by logging on to our website,

The writer is welcome to contact us to provide fuller details of the issues highlighted so that we can better address the same.


Kuala Lumpur

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