THERE is no point in the government granting a six-month bank loan moratorium, if borrowers still have to pay higher accrued interest on their debts, said former finance minister Lim Guan Eng.

According to Lim, Finance Minister Tengku Zafrul Tengku Abdul Aziz can effectively pull the country out of recession and alleviate the financial problems of Malaysian workers, if the bank loan moratorium is interest-free for all but the top 20 earners.

“This higher overall cost of borrowing for those opting in to the bank loan moratorium was highlighted by Bank Negara Malaysia. It warned borrowers that while banks will not charge any compound interest or penalty interest while payment is being deferred, interest will still be accrued on the deferred payments,” said Lim, the MP for Bagan.

“In other words, interest would be charged on the loan principal during the six-month loan moratorium.”

He added that the government and BNM must be reminded that the current financial distress faced by borrowers is caused by Covid-19 pandemic and is not of the people’s doing.

“How does it help borrowers facing reduced income to know the moral hazard of banks not required to take any ‘hair cut’ or contributing through corporate social responsibility to share in the financial hardships faced by the borrowers?

“Yet, borrowers are required to foot the bill despite their reduced income. Meanwhile, banks can still enjoy their healthy profits as normal,” he added.

To this, Lim urged Perikatan Nasional to press BNM to direct the banking industry to waive interest during the moratorium, excluding top 20 earners.

“Otherwise, any plan that seeks to offer financial help will be meaningless and an exercise in futility, serving to protect the profits of the banks at the expense of 8 million Malaysians and companies seeking assistance through the moratorium,” the DAP secretary-general said.

Last week, BNM issued a statement saying private, micro and SME borrowers affected by the pandemic may apply for a six-month moratorium.

The central bank added that borrowers are advised that opting for repayment assistance will increase the overall cost of borrowing, as interest will continue to accrue on deferred payments.

Tengku Zafrul was appointed as the co-ordinating minister for the plan on Friday. – July 11, 2021.