28 Jan COVID-19 Reality: Loan Moratorium vs Targeted Repayment Assistance
“Loan moratorium” has been a buzz phrase since March 2020 when the MCO was first implemented, triggering jitters among Malaysians who were bracing for pay-cuts, lay-offs, or poor returns of sales. The Federal Government announced an automatic 6-month moratorium for all loan repayments beginning 1 April 2020; unless the borrower decides to not accept the moratorium. This measure was aimed to relieve the monthly burden of individuals as well as businesses, to free-up cash flow from bank debts for a period of time. The moratorium was well received by many and even businesses supported the measure that helped minimised the effects on retail spending. After the 6-month period, the Federal Government took the next step to announce the Targeted Repayment Assistance (TRA).
Although the general scheme in the TRA is also a moratorium on loan repayments, the emphasis was more on the targeted nature of the assistance rather than it being automatically blanketed like the previous one. Announcement of the TRA was met with mixed reactions where some voiced out their hopes that the earlier moratorium should be maintained and continued while others raised the issue that such a moratorium would incur heavy losses to the banking sector. Other points of concern include the unclear performance of the banking industry (few reports or indicators on profit or losses), the need for a blanketed moratorium, unclear impact of the 6-month moratorium on retail spending power, and the politicisation of the issue by certain quarters for easy brownie points.
Some questions to ponder would be how much has the moratorium on loan repayments affected the banks? How much impact has the moratorium on loan repayments affect retail spending power? Looking ahead, what are the impacts of the moratorium on the banks and retail spending power as the pandemic gains momentum?