THE targeted loan moratorium extension and flexible repayment facility will not only help borrowers in need of assistance, but will allow the banking sector to carry out its business, said analysts.

AmBank Group chief economist Anthony Dass said the targeted approach is a better way to help the public than a blanket moratorium as it will ensure that it only benefits borrowers who are in need while others can continue servicing their debt.

“This is what we used to do in the past, even during the 1997/1998 Asian financial crisis,” he told The Malaysian Insight.

“When the moratorium was first introduced, it was blanket move that even those who didn’t need it took it.

“I also noticed there is a bit of money that moved into stock market, which means the money went from the left hand to the right hand kind of thing.”

He said while the initial moratorium benefited borrowers, banks are struggling as there is no income from interests for six months.

Anthony said although there are campaigns for a moratorium extension with blanket approval for another six months, businesses in certain economic sectors have been picking up in May and June.

“If you give extend the moratorium another six months, the risk of this potentially becoming a subsidy mentality is very high.”

Finance Minister Tengku Zafrul Abdul Aziz earlier said the sector is estimated to have recorded loses up to RM6.4 billion due to the six-month moratorium.

Agreeing with the minister’s estimation, Anthony said banks have no income from interest payments during the six-month moratorium that will expire in September.

He added the first moratorium is a good move to survive the pandemic, as the situation was dire in March.

“The impact to bank earnings will be much significantly lower than the modification loss in Q2 under the automatic loan moratorium,” he said when asked for his projections for earnings following the announcement on targeted assistance.

Meanwhile, MIDF Amanah Investment Bank Bhd economist Mazlina Abdul Rahman said it is reasonable to offer targeted extension for loan moratorium to provide breathing space for affected individuals and businesses while at the same time minimising impact on the banking sector.

“Malaysian economy is on a gradual recovery as reflected in some of its macro indicators such as industrial production, exports and retail sales.

“I believe that this is a better option than to continue providing the moratorium on a blanket approach.

“It is because there could be many borrowers who are opting for moratorium not because they are in financial distress but simply want the opportunity to preserve capital or for investment purposes.”

Mazlina said it is important to bear in mind that the moratorium is a temporary relief and unlikely to provide a comprehensive relief to businesses and individuals given the demand situation on the ground that remains fragile.

Prime Minister Muhyiddin Yassin yesterday announced the targeted loan moratorium and repayment flexibility for individuals and SMEs who continue to be affected by Covid-19. – July 30, 2020.