Consider dropping accrued interest under moratorium, Tengku Zafrul tells banks

(FMT) – Finance Minister Tengku Zafrul Aziz today asked banks to consider abolishing accrued interest on hire purchase (HP) loans and fixed rate Islamic financing during the six-month moratorium on repayments announced in March.

Tengku Zafrul said he is making the suggestion after taking into account public concerns.

He said the ministry is ready to work with Bank Negara Malaysia (BNM) and the banking sector to ensure the recommendation can be carried out, if the institutions are agreeable.

In a posting on his Facebook page, Tengku Zafrul said several banks are already offering loan deferment without imposing accrued or compounded interest, but it does not cover all loan products.

He said each bank sets its own approach on matters related to interest imposition during the moratorium.

“As there is a possibility that it can be implemented, and taking the people’s request into account, I would like to suggest that all financial institutions, especially those involved in this moratorium, to consider abolishing accrued interest on hire purchase loans or profits for fixed-rate Islamic financing, for the six-month moratorium period,” he said.

“The government is always sensitive to the people’s needs, especially those of the B40 and M40, and is concerned about this.

“Given the challenging economic conditions caused by the Covid-19 outbreak, I sincerely hope that this view can be given due consideration by Bank Negara and other financial institutions in the country.”

Banks had come under criticism after the Association of Banks Malaysia (ABM) said two days ago that hire purchase customers taking up the moratorium from April 1 to Sept 30 will have an option in terms of repayment.

It said customers could choose to pay the accumulated six months’ deferred instalments together with their October 2020 instalment without being charged any additional interest.

Alternatively, they could continue the repayment of these instalments through an extension of six months in repayment period after the original maturity date.

In this case, ABM said, interest based on the contractual rate will be charged on the amount of the deferred instalments until they are fully repaid.

BNM said yesterday there are no changes to the policy for the six-month moratorium on hire purchase loan repayments and fixed-rate Islamic financing announced on March 25.

It also said it had never stated that interest would be waived, adding that it had made it clear previously that interest would continue to accrue.