KUALA LUMPUR, May 1 — The Bank Negara Malaysia (BNM) said that it regrets the "confusion and anxiety”, stemming from its announcement on changes to the six-month moratorium for hire purchase (HP) loans and fixed-rate Islamic financing yesterday.

In a newly released frequently asked questions (FAQs) list, BNM denied that it had also backpedalled on its initial announcement.

In its explainer, BNM stressed that the payment deferment is still automatic for HP and fixed rate Islamic financing, adding that what is required now is an additional step to comply with procedural requirements under the Hire-Purchase Act 1967 (HP Act) and Shariah.

"This additional step is unavoidable, and is required to incorporate the changes to the payment schedule and/or amounts as a result of the six-month payment deferment in loan/financing agreements.

"We sincerely regret any confusion and anxiety that this announcement may have caused. The deferment of loan repayments is meant to ease cash flows for borrowers/customers affected by the Covid-19 pandemic. This intent remains the same. The confusion arises because of the misperception that the repayment amounts for a HP loan cannot be changed,” it said.

BNM added that the misperception arose, due to an illustration provided in an initial version of the FAQs, "where certain assumptions and caveats were made.”

It said that it had later removed the example when banks provided their own illustrations.

"Our illustration was not intended to preclude interest charges accrued on the deferred loans. Borrowers/customers who have had their HP loans and fixed-rate Islamic financing accounts automatically deferred since April 1, 2020, will continue to benefit from the payment deferment until September 30, 2020,” it said, adding that HP loan and fixed-rate Islamic financing borrowers who initially accepted the moratorium, but have since changed their mind, can still opt out of the deferment.

BNM then provided an example of a RM50,000 HP loan with a remaining tenure of five years and a fixed interest of 2.71 per cent (or an effective rate of 5.36 per cent) per annum:

Before the deferment, the monthly instalment was RM712.

But should the deferment option be accepted, based on this example, the monthly instalment is now RM731, or an increase by 2 per cent or RM19. Consequently, the total interest increase incurred is RM1,130.        

Several reports emerged yesterday evening, citing a BNM press release, on a purported reversal from what was initially announced with regards to deferment of HP loans and fixed-rate Islamic financing.

Financial website, Ringgit Plus, reported that the press release had "hinted of a big change that will affect millions of Malaysians currently servicing car loans or Islamic financing.”

The report which was one of those widely-shared by those angered by the announcement, reported that BNM had also implied that from May 1, 2020, the six-month moratorium will also no longer be an automatic opt-in for all customers.

Ringgit Plus reported that the press release further stated that BNM required that all borrowers "are provided with clear information on the process and changes to the terms of their agreements”, and that the banking institutions provide borrowers with "necessary steps that they need to take to complete the process of deferring their loan/financing payments”.

This was seen as a departure from what was announced initially, where customers are only asked to opt-out of the deferment, should they want to continue servicing their loans with their banks, as otherwise, banks would grant an automatic deferment.

The confusion further escalated and caused widespread anger; which even led to the start of an online petition denouncing the move by BNM and demanding for zero per cent interest on the deferred instalment payments.

The Association of Banks in Malaysia had also released a statement after BNM, in which two points again caused alarm among the public.

In the statement, it said that HP loan customers who choose to take up the moratorium, will have two options in terms of their repayment. whereby they can either choose to pay the accumulated 6 months’ deferred instalments together with their October 2020 instalment without being charged any additional interest or continue the repayment of these instalments post October 2020 through an extension of 6 months in repayment period after the original maturity date.

In this case, it said that interest based on the contractual rate will be charged on the amount of the deferred instalments that remains outstanding until these instalments are fully repaid, which should be by the end of the extended 6-month tenure.

Last month, Prime Minister Tan Sri Muhyiddin Yassin announced the government’s move to freeze loan repayments for six months due to the coronavirus disease, which he said will provide relief worth RM100 billion to Malaysians.

The prime minister said the unprecedented move BNM announced on March 24, was the government’s response to public concern about hardships they are enduring due to the movement control order (MCO).