THE Covid-19 outbreak has left a lasting socio-economic impact to Malaysia. The predicaments of our households and businesses are undoubtedly getting more acute as the result of deteriorating financial health.
For instance, total non-performing loans (NPLs) reached their highest level in the last nine years, risen to RM28.7 at end of 2020. In fact, the trend of non-performing loan impairment was recorded among households, wholesale and retail outlets, restaurants and hotels after the overall loan moratorium ended.
For households, loss of income and unemployment has affected the ability to meet loan repayment commitments, especially for those in high debt; and these factors contribute to the increase in impaired loans.
For the business sector, the failure to service their loans was due to loss of income and business closures, especially in the tourism, retail and recreational activities.
More worrisome, overall affected loans are expected to increase by more than 4 per cent of total loans by the end of 2021 which will be driven by business segments, according to the Bank Negara Malaysia ‘Financial Stability Review – First Half 2020’ Report.
This needs to be addressed as the impact of rising NPL rates may extend beyond the financial sector and affect Malaysia’s economic recovery efforts. Therefore, the Ministry of Finance and Bank Negara should take proactive policy action to address this issue.
For example, payment assistance and other relief measures should be extended and expanded in line with the impact of the third wave of the epidemic. It is in the collective interest of the banking industry to continue supporting eligible businesses and households during this challenging period.
Furthermore, the net profit report of some major banks last year indicates that the six-month automatic moratorium did not at all resulted in losses as predicted by the Finance Minister. It also proves that our banks are actually resilient due to the capital buffers developed over the years.
Overall, I sincerely hope we will do our best to alleviate the suffering of those who face financial difficulties.
DATO SERI UTAMA MOHAMAD HASAN
UMNO Deputy President