What happens when the Loan Moratorium ends, and the financial institutions pursue borrowers(peminjam) for their loan debts? Remember government statements alone are not enough - what we needed was laws that clearly provided for moratoriums, and also how the 're-payment' of the debt is done. If not many will lose homes, cars and even be declared by financial institutions that look at just the words of your loan agreement... Remember, many may not even be financially capable to continue payment at same pre-moratorium rates by reason of loss of income/jobs, etc
MORATORIUM on Loan Payments is something that many are happy during this pandemic..BUT beware for what happens later..
When the moratorium is lifted (or ends), will the bank and/or financial institutions or others demand immediate payment of ALL OVERDUE?
Would INTEREST be charged for the delayed payment - how much?
Would the LOAN be re-structured resulting in increased MONTHLY payments - remember most loans are for a fixed time limit, 10 years...30 years...etc???
Now, the biggest concern is for the poor and the lower middle income groups - because their financial planning is very tight > increasing monthly loan obligations is simply not an option...Extending loan re-payment period may also be problematic, as the peminjam may have considered to have it all paid off before they retire
Further, the loss or employment and income needs to be factored in - many small businesses, shops, etc may be closed because they simply could not survive the long closures and loss of businesses... Remember, how even the introduction of GST resulted in so many shops shutting down ...that partially due to the lack of appreciation of how business operates in many small businesses..
Example - in many shops, they do not buy the products supplied and exhibited in their shops by suppliers and 'middle-men' - the arrangement is simply that they will accept and try to sell - if sold, then payment is made to supplier and profits taken by the retailer...But then the GST - which required the retailer to pay taxes the moment products received...
So, now during the pandemic, the government seems to have focused more on the big employer - the factories, etc... Many small businesses have not been able to function ...and rental/utilities obligations rises
The government has the power vide LAWS, more so during an Emergency, to change existing laws and practices. In my opinion, they still can, by law
a) A law that will have the effect of varying all existing financial/loan agreements with financial institutions...does it cover Hire-Purchase Agreement(Sewa Beli), as many Malaysians buy household items on Hire-Purchase?
b) Moratorium period - automatic extension of loan repayment period at the same rate as per the moratorium. Should the moratorium be extended or take into account the loss of income/jobs especially for the poor and middle-income earners.
c) During the moratorium, the normal interest applies on unpaid debt - BUT NO Compounded interest, or interest on past interest.
d) The government talked about a 6-month moratorium - should this 'moratorium period' be extended from the start of the MCO that resulted closure of businesses and end of income UNTIL ....
e) Should financial institutions be compelled to grant further moratorium after the pandemic taking into account loss of job/business/income - whereby one without income cannot make repayments...
f) Should the government, to appease financial institutions, be willing to stand GUARANTOR to the poor and low-middle income earner to appease the financial institutions.
Other questions about the MORATORIUM - it seems that were no (or a lack of needed laws) to VARY existing contractual obligations between the 'peminjam' and the financial institutions?
I do not think the individual financial institutions entered into any CONTRACT with the Peminjam to vary this loan Agreements?
Did Bank Negara(or the Malaysian Government) enter into any legal AGREEMENTS with the Financial Institutions to this effect - if YES, please disclose it publicly so, the Peminjam can use this agreement if and when the banks starts coming after them..
REMEMBER, Bankruptcy is not the only concern - a failure on loan-repayment will result in loss of HOMES, Cars, etc - for many 'peminjam' has placed their homes, etc as security - hence, if they breach their loan repayment obligations, then they may find their HOMES taken away and auctioned off - and many a time, the auction value is really so much lower than the market value.
Worse, our Malaysian Ringgit may have lost its value - hence, RM10 before pandemic may today be less of value..
Bank Negara Malaysia just came out stating that '..banks
can’t waive interest for loans despite moratorium...' (see below)
Remember, people did not work or earn income BECAUSE OF GOVERNMENT ACTION in response to the Covid-19 Pandemic on public health grounds - hence, should the government be responsible to help the poor and middle-income group that have been affected by loss of business/jobs/income???
It was sad that despite the loss/reduction of income, government unmercifully increased FINES for even smaller offences.
Government has been spending so much monies - but how much of those really reached to the individual persons suffering. Government employees and pensioners were secure as they continued receiving regular income/pensions > so, the people that need to be dealt with should not include any who continued having jobs and receiving normal wages.
See other posts, some of which may be:-
COVID - Workers at risk - as Government statements without LAWS will not vary employment contracts? Will suffer with no remedies?
Azmin/Ministry of INTERNATIONAL TRADE and Industry - did it do its job to protect Malaysian businesses vis-a-vis contractual obligations, etc with overseas companies??
Bank Negara explains why banks can’t waive interest for loans despite moratorium, says will hurt Malaysia’s long-term economic recovery
KUALA LUMPUR, Aug 13 ― Financial institutions cannot waive interest payments on loans that will accrue during the ongoing six-month moratorium as there will be serious after-effects for the country’s economic recovery from the Covid-19 pandemic in the long run, Bank Negara Malaysia (BNM) said today.
BNM governor Datuk Nor Shamsiah Mohd Yunus explained that profits earned from accrued interest during the loan moratorium are meant to cover the funding costs of banks.
This includes interest payment on deposits and other borrowings of funds by banks to fund the loans they provide.
“So waiving accrued interest payment on all individual and business loans under the moratorium will have significant long term consequences.
“Let me put things in perspective, interest income accounts for 80 per cent of bank revenues and total individual and SME loans that are eligible for auto moratorium accounts for close to RM1.4 trillion.
“So there are serious ramifications if banks were to waive accrued interest given their critical role in the economy,” she told an online news conference after releasing the report of Malaysia’s Economic Performance Second Quarter 2021.
Many Malaysian businesses have been hard hit by repeated lockdowns that were supposed to slow the spread of the disease, and are struggling to repay their borrowings.
The opt-in loan moratorium announced by the Finance Ministry in July came under fire for not waiving accrued interest during the moratorium. Critics claimed the added interest would put more financial strain on borrowers they could ill-afford in future.
Nor Shamsiah was asked if banks could consider a waiver on the interest payment for loans.
Explaining further, she said it is very critical for banks to remain sound and painted possible scenarios for the country’s economy if the financial institutions were hit.
She pointed out that banks had already agreed to waive late charges and compound interest on applicants’ loans during the moratorium to help borrowers.
“Firstly, banks will pull back on lending to conserve their buffers, especially with higher credit losses still expected to emerge.
“Their own credit rating may be downgraded to reflect weaker future earning capacities and make it more expensive for banks to raise capital and this higher cost will be passed on to borrowers.
“Confidence in banks will be affected and this could trigger liquidity stress and depositors may have concerns about the safety of their deposits and this action will also jeopardise depositors’ interest when the earnings of banks are adversely affected.
“Banks will also not be able to pay dividends to their retail investors and institutional funds that hold public savings ― such as EPF, KWAP, PNB, LTAT and Tabung Haji ― and this will result in lower return to depositors and retirement savings,” she said.
According to Nor Shamsiah, the repayment assistance offered by Malaysian banks are the most extensive in any country, in terms of scale and scope.
On whether the BNM would consider extending the ongoing moratorium beyond the stipulated period given the weak recovery and possibility of Covid-19 cases resurgences, she advised borrowers to seek out their respective banks to discuss possible continuation of repayment assistance in the future.
“Well, with the reopening of the economy we expect repayment assistance to be more targeted, as the financial need and circumstances will differ from each borrower.
“We do recognise that borrowers may continue to face challenges to service loans when the current moratorium lapses even with the reopening of the economy.
“For such borrowers, there are such avenues to help them manage debt obligations,” she said, adding that banks including BNM’s Credit Counselling and Debt Management Agency were prepared to discuss alternative financial plans for borrowers.
She also stressed that it was crucial for borrowers to take early steps by availing themselves of these avenues if they anticipated they will continue to face financial difficulties after their current repayment assistance ends.
The six-month loan moratorium period
introduced under the Pemulih economic package offered eligible
borrowers to defer their loan payments, allowing them to start making
full payments again only in 2022. - Malay Mail, 13/8/2021
No comments:
Post a Comment