By Chee Jo-Ey
TO curb the coronavirus outbreak, the government has implemented the Movement Control Order that affects many businesses and individuals in the country.
Bank Negara Malaysia (BNM) has announced additional measures to assist borrowers or customers experiencing temporary financial constraints due to the Covid-19 pandemic.
To ease the cash flow of small and medium-sized enterprises (SMEs) and individuals who are likely to be affected by the virus outbreak, banking institutions will grant an automatic moratorium on all loan or financing repayments or payments, principal and interest (except for credit card balances), by individuals and SME borrowers or customers for a period of six months from April 1.
The automatic moratorium is applicable to loans or financing that are not in arrears exceeding 90 days as at April 1 and denominated in the ringgit.
As businesses and individuals such as freelancers and casual workers struggle to stay afloat, they are now granted a leeway in loan repayments. But under what circumstances should they take up the offer as although payments are deferred, borrowers are still required to make them once the moratorium period is over.
University of Malaya senior lecturer in the faculty of business and accountancy Eric Koh said: “Broadly, I see it as having three steps. First, ideally, if you can handle it, try to just pay up and not to use the moratorium. That would help reduce both the financial and administrative burdens.
“Secondly, it would be great if you can work out some relief measures with your suppliers, especially those with very good, long-term relationships. This may be in the form of payment rescheduling or discounts. If this can be done, then it may also reduce the strain or financial burden and monitoring with the banks. Again, this may be a fairly ideal situation.
“Thirdly, if you still can’t help it, you’ll most likely need your bank’s help via the moratorium. Do ensure that you discuss with your account manager thoroughly and that the documents are properly done. You should also exercise strict financial discipline and monitoring to ensure compliance.”
Koh wouldn’t suggest being lax and taking advantage of the moratorium for other purposes. It should be strictly to give people some breathing space through the hard times, hopefully temporarily.
Meanwhile, for the longer term, people may also reflect on what they can do to help mitigate this problem. This may be in the form of changing the way you run your business or having some better forms of contingency plan.
Banking institutions are generally expected to facilitate the resumption of repayments or payments after the moratorium period consistent with the affordability of borrowers or customers. This includes offering suitable workout plans to repay or pay the principal and interest or profit accrued during the moratorium period.
They must also ensure that individuals and SMEs that do not wish to avail themselves of the automatic moratorium can continue with their current repayment or payment terms with minimal inconvenience.
On the other hand, Sunway University Business School economics professor Dr Yeah Kim Leng said: “The moratorium on debt servicing payments will enable borrowers to have additional disposable income to spend or save. Even if they can afford to continue servicing their loans they should still take advantage of the moratorium to generate extra income by channeling to investments that produce higher returns than the debt servicing cost.
“Given the low interest rates in servicing housing, auto and consumer credit loans, the loan payments could give higher returns when invested in real estate investment trusts (REITs) and other safe unit trusts. For higher cost credit card loans they should settle, reduce or take a term loan to pay off the outstanding amount.” — March 25, 2020
