MP SPEAKS | Finance Minister Tengku Zafrul Abdul Aziz’s new appointment as the National Recovery Plan (NRP) coordinating minister will only be effective in pulling the economy out of the economic recession and alleviating the financial problems of Malaysian workers and businesses with reduced incomes if the bank loan moratorium is interest-free (except for the Top 20).
There is no point for the government to grant a six-month bank loan moratorium if borrowers still have to pay even higher accrued interest earned by banks.
This higher overall cost of borrowing for those opting in for the bank loan moratorium was highlighted by Bank Negara.
Bank Negara warned borrowers that whilst banks will not charge any compounding interest or penalty interest while the payment is being deferred, interest will still be accrued on the deferred payments.
In other words, interest would be charged on the loan principal during the six-month loan moratorium.
How does that help borrowers facing reduced income or the moral hazard of banks not requiring to take any “hair cut” or contributing the corporate social responsibility of sharing in the financial hardships faced by the borrowers?
Both the government and Bank Negara must be reminded that the current financial distress faced by borrowers is caused by the Covid-19 pandemic and not of their doing.
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And yet, borrowers are required to foot the bill despite reduced income whilst banks can still enjoy their healthy profits as normal.
Malaysian workers are facing reduced incomes or no income if they are retrenched. Many businesses are suffering drastically reduced cash flow and closure is a real threat.
The Entrepreneur Development and Cooperatives Ministry reported that more than 90 percent of the micro, small and medium enterprises (MSMEs) risked closure, while the SME Association of Malaysia disclosed that 100,000 SMEs closed last year with 50,000 more expected to suffer the same fate from the current total lockdown.
And yet several banks have registered record profits for the first quarter of this year to continue their healthy after-tax profits of RM32.3 billion and more than RM23 billion for 2019 and 2020 respectively.
As borrowers opting in for the loan moratorium are not classified as non-performing loans, banks continue to record healthy profits because they are able to keep earning accrued interest during the six-month bank loan moratorium.
Further, they do not have to waive hire-purchase interest unlike the first bank loan moratorium last year.
The time has come for the PN government to act boldly and instruct Bank Negara to direct the banking industry to waive interest during the bank loan moratorium except for the Top 20.
Otherwise, any NRP that seeks to offer financial help, will be meaningless and an exercise in futility, serving to protect the profits of the banks at the expense of eight million Malaysian individuals and companies seeking assistance from the loan moratorium. - Mkini
LIM GUAN ENG is DAP secretary-general and Bagan MP.
The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.
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