Local banks waive compounding of loan interest during moratorium

PETALING JAYA: Local banks have come forward to say that they will not be compounding interest during the six-months repayment moratorium that was announced by Bank Negara Malaysia on March 25,

RHB Banking Group was the first to make the move, stating that the exemption would only apply to retail and small to medium enterprise (SME) customers, with effect from April 1. For Islamic financing, RHB will continue to observe the principle of no compounding of profit.

“The moratorium will apply automatically to all RHB Bank and RHB Islamic Retail and SME customers, with the exception of loans/financing facilities that are in arrears exceeding 90 days as at April 1, 2020,” it said.

Meanwhile, for credit card facilities, customers may request to convert outstanding balances into a 3-year term loan with reduced interest rates.

RHB group managing director Datuk Khairussaleh Ramli said further details on the repayment deferment and restructuring has been made available on the group’s corporate website.

Meanwhile, in a separate statement, Maybank said it will not be compounding interest for all eligible individual, SME and non retail/corporate customers loan facilities.

Eligible products under the automatic scheme for retail and SME clients include personal, mortgage, ASB, education and SME loans. Fixed-rate hire purchase loans already do not have compounding interest.

Eligible non-retail/corporate customers will, however, need to submit the required application for moratorium through their relationship managers or corporate bankers.

AmBank and AmBank Islamic will be offering an automatic payment deferment for loans and financing for all individuals and SME customers.

“It is our responsibility as a trusted homegrown financial institution to come to the aid of our customers in their time of need. Forgoing compounding interest on top of the six-month payment deferment initiative and the credit card balance conversion programme is our way of giving back, “ said AmBank Group CEO Datuk Sulaiman Mohd Tahir.

Customers who wish to opt out from the automatic payment deferment may simply continue with their regular monthly instalment payments.

CIMB stated interest/ profit will continue to accrue on loan/financing repayments that are deferred, and customers will need to honour the deferred repayments in the future.

“Interest on conventional loans will not be compounded during the moratorium period,” it said in a statement.

Individual customers may choose to opt-out should they wish to continue with their existing schedule. SME customers who wish to opt-out are advised to visit CIMB’s website or to contact their relationship manager.

Credit card customers may opt-in to convert their card balances to a term loan/ financing at 13% per annum and up to a tenure of three years.

“For our corporate borrowers, CIMB will proactively engage such customers to facilitate their needs during this challenging time. It is CIMB’s intention to support and enable corporations to overcome current disruptions to their business operations, in order to support wider employment and economic recovery,” it said.

For CIMB’s Islamic financing, profit will continue to be accrued during the moratorium period, but will not be compounded in line with Shariah principles. Loan/ financing repayment resumes after the moratorium.

Public Bank also announced that it would not be compounding interest on the monthly instalment payments of loans for all eligible individual and business customers.

It stated that for Islamic financing it clarified that profit will continue to accrue on the outstanding principal amount, however the profits will not be compounded as well, in line with Shariah principles.

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