BJEH 2153_B ENGINEERING ECONOMY A211

GROUP 3
PROJECT GROUP ASSIGNMENT 2 TOPIC:
MORATORIUM

PREPARED FOR:
DR MASTORA BINTI MUSTAFAR

PREPARED BY:

NO NAME NO MATRIC

1. NORFARAHANA UMAIRAH BINTI RAHMAT 270285

2. CHE MOHD SAHARUDDIN BIN CHE ABDULLAH 270207

3. MOHAMAD HAFIZ BIN KHALID 271204

4. TUAN MUHAMMAD YUSRI BIN TUAN YUSOF 271205

5. MUHAMAD AMIRUL AMIN BIN ADNAN 270398

 TABLE OF CONTENT

EXECUTIVE SUMMARY...............................................................................................1

1.0 INTRODUCTION.......................................................................................................2 - 3

2.0 ISSUE OF MORATORIUM IN MALAYSIA DURING COVID-19 PANDEMIC..........4 - 5

3.0 ADVANTAGES AND DISADVANTAGES OF MORATORIUM.........................6 - 7

4.0 TYPE OF MORATORIUM.......................................................................................8 - 12

5.0 IMPLICATION OF MORATORIUM DURING COVID- 19................................12 - 23

6.0 DISCUSS AND JUSTIFY SOLUTIONS...................................................................23 - 25

CONCLUSION..................................................................................................................25 - 26

REFERENCES .................................................................................................................26 - 28

APENDIX...........................................................................................................................28 - 29
EXECUTIVE SUMMARY

The Covid-19 epidemic has had a significant influence on us and has evolved into

significant health, social, and humanitarian problem. The situation in Malaysia was made

worse by the government's election in early March 2020, when the country was already beset

by debt issues, financial limits, falling oil prices, and the impact of the worldwide shutdown

on commerce and tourism. Not only that, but Malaysian employees and people confront

challenges, particularly in terms of finances. In terms of money, the curfew was a financial

disaster. The economy is slowing, wreaking havoc on employment, earnings, and livelihoods,

disrupting supply networks and companies, and intensifying inequality, poverty, and misery,

particularly among the poor. Despite the many remedies proposed, it should be highlighted

that the prohibition on lending and restructuring, according to Maybank Kim Eng Research,

poses serious dangers to the banking sector in ASEAN, including Malaysia, and should be

watched in the future. Many regional banking systems have placed loans under moratoriums,

suspending interest and/or principal payments as part of Covid-19's emergency relief

measures.

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1.0 INTRODUCTION

Following the emergence of Covid-19 in Malaysia and the year-long shutdown, regular

life has been severely disrupted. People were laid off, their jobs were gone, their financial

security was lost, workers were forced to work from home, and some were ordered not to go to

work during this period. Following the epidemic, the economy began to deteriorate slowly.

Bank Negara Malaysia (BNM) has implemented a moratorium provision to give some relief to

creditors during this hectic season. BNM has authorized all current banks to provide a six-

month suspension on the payment of all payments in arrears between 1 April 2020 and 30

September 2020, according to a notification dated 1 April 2020. (Bank Negara Malaysia,

2020). The moratorium period may be thought of as a temporary halt to all financial activities

until the situation returns to normal and the suspension is lifted. The government, business, or,

in this case, the BNM Central Bank, can impose a moratorium. Moratoriums are frequently

enforced as a result of non-permanent financial concerns. In layman's words, a moratorium is a

time of repayment leave' during which creditors are given the option of deferring payment. As

a result, the loan conditions are modified by mutual consent and agreement between the lender

and the creditor. A moratorium is a legal term that refers to a temporary suspension of

legislation to allow for a proper settlement of an opposing dispute.

Malaysia is one of the few countries in the world to implement an automatic six-month

moratorium beginning April 2020, for the benefit of people who have been affected by the

pandemic and small and medium-sized businesses (SMEs) during the implementation of the

Movement Control Order (MCO) to combat the spread of the Covid-19. Every individual and

small business loan that meets the criteria will be immediately qualified for the moratorium

postponement (The Association of Banks in Malaysia, 2021). According to Moody's Investors

Service, Malaysia is one of the Southeast Asia nations with the broadest moratorium, covering

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almost 80% of total loans (Kana, 2020). As the number of instances of Covid-19 has increased

3
significantly, the MCO has imposed a comprehensive national lockdown beginning June 1st

(Teoh, 2021). In response to the growing number of instances in Malaysia, the government has

announced a one-time help package for the Bottom 40 3 and Middle 40 categories, as well as a

three-month freeze on bank loans (Babulal, 2021). In response to the increased number of

cases and the lockdown, BNM has stated that creditors can request moratorium extensions on

their current bank loans, which will not damage their credit record and would allow them to

continue receiving targeted repayment help. The moratorium will be viewed as a huge help to

creditors, as it will relieve their financial responsibilities during these difficult times. Although

a moratorium has advantages, it also has disadvantages, as others have pointed out. Apart from

the extra tenure extensions that will be described in this article, there are various alternatives

for what happens to an individual's loans when they choose the moratorium. Aside from the

moratorium, the government has implemented several economic stimulus measures aimed at

"preserving the welfare of individuals, supporting enterprises, and strengthening the

economy." The BNM and other businesses provide initiatives such as the RM295 billion

PRIHATIN and PENJANA economic stimulus package (Prime Minister's Office of Malaysia,

2021), and the RM20 billion PEMERKASA (Strategic Programmed to Empower the People

and Economy). The paper is divided into three sections. Part 1 of this report provides current

information on challenges or problems with the moratorium's enforcement during the MCO to

resolve these issues. Part 2 of the report discusses the implications of a moratorium during

Covid-19, including why it is necessary and how it may affect creditors. Part 3 provides the

recommendation or guidance for policies in the immediate, recovery, and longer-term.

4
2.0 ISSUE OF MORATORIUM IN MALAYSIA DURING COVID-19 PANDEMIC

The Covid-19 epidemic has had a significant impact on the health sector as well as the

economy (Rizwan et al. 2020). According to Baldwin (2020b), the Covid-19 pandemic may

have lasted longer than the SARS epidemic (SARS). The local population hopes that once the

limitations are gone, the sickness will be eradicated and the country will return to normal. This

Coved -19 Pandemic will likewise come to an end and will not impede the economy from

recovering. Due to the expansion of the Covid-19 pandemic, the impacts of closures and

economic sanctions were felt disproportionately by all parts of society, particularly those at the

bottom of the socioeconomic distribution. Shretta (2020) asserted that the Covid-19 epidemic

has reduced worldwide economic activity, particularly in nations or organizations involved in

assembling, manufacturing, and supplying raw materials. The abrupt emergence of Covid-19

in 2020 had a significant economic impact on Malaysia. Our entire routine was put on hold.

Many people were impacted, and they lost their source of income. The mobility control order

(MCO) is a two-week restriction that can be extended up to three months. As a result, the

government has devised several plans to help us restore our financial situation, including the

imposition of a moratorium. Bank Negara Malaysia (BNM) declared on March 25 (PMO,

2020) that local banks shall give a 6-month moratorium (deferment of loan repayment or

monthly installments) to persons, particularly bank clients, beginning May 1, 2020. Within

time, people breathed a sigh of relief because they thought that Bank Negara understood the

pressures of the people's lives due to PKP which is restricted them from working and earning

income to cover their living, including the burden of bank debt. The introduction of a

moratorium will hopefully help alleviate the financial problems we face. However, the

moratorium also had a negative impact, although, in principle, it was able to help the affected

groups. According to the Sinar Harian Report (28 June 2021), the Minister of Rural

5
Development, Datuk Dr. Abd Latiff Ahmad in a statement said, Mara, will give a targeted loan

6
deferment to 10,000 former students with a financial implication of RM4 million. Mara also

granted 1,500 businesses an RM4.8 million deferral of targeted business funding, as well as an

RM6.6 million rental reduction to 5,500 tenants of Mara corporate premises. As declared by

Bank Negara Malaysia (BNM) and the five banking industries on October 1, 2020, the

moratorium aid for borrowers has changed to targeted repayment assistance (TRA). This

implies that persons whose earnings are impacted by Covid19 will receive support. According

to Bank Negara Malaysia (BNM) and the banking industry, the moratorium aid for borrowers

has been converted to targeted repayment assistance (TRA). This implies that people whose

earnings are impacted by the Covid-19 Pandemic will receive support. As we all know, not all

borrowers are capable of repaying loan installments before the implementation of the

Movement Control Order (PKP) phase. Because of the tremendous impact of PKPs and their

fluctuating income estimates, some of us are still pushing for the TRA to be reviewed. Even

though official data from BNM reveals that 85 percent of borrowers have made payments

since the beginning of last month, the public's concerns must take precedence.

Next, the extension of the payment is not covered by insurance. Insurance only covers

the original agreement. Its means that it depends on the tenure financing from the tenure

agreement. Any changes to the agreement will not be entertaining by them. Hence, the burden

will fall on their heirs. The longer the debt is kept, the longer the repayment period will be

extended. Lastly, the moratorium is a burden to the heirs when there is a sudden death

happened to the borrower. Since insurance only covers the original tenure financing, the

balance that has been moratorium will be borne by heirs. If an heir is not aware of it, they will

feel the burden and have to settle the dispute as soon as possible. If the government is unable

to aid the people, this will result in waste and a lack of future savings. Then there's the fact that

the payment extension isn't covered by insurance. Only the initial agreement is covered by

insurance. It indicates that it is reliant on the tenure agreement's finance. They will not accept

7
any

8
 modifications to the agreement. As a result, their heirs will bear the cost. The longer you keep

the debt, the longer you'll have to pay it back. Finally, when the borrower dies unexpectedly,

the heirs are burdened by the moratorium. Because insurance only covers the initial tenure

finance, heirs will be responsible for the balance. If the heir is unaware of the situation, they

will feel obligated to resolve the conflict as quickly as feasible. Nonetheless, when individuals

are given the purchasing and utilizing the power of money, the moratorium has a more

favorable influence on borrowers, banks, and the national economy. When the country's

economy improves, this may be demonstrated. Furthermore, moratorium 6 is applied

selectively to persons who require it to save specific sectors of the economy.

3.0 ADVANTAGES AND DISADVANTAGES OF MORATORIUM

3.1 Helpful in a liquidity crisis

The borrower is instantly freed of monthly interest payments, which is the first and

most significant benefit of the moratorium, as it enables them to avoid cash flow concerns.

Assume your monthly EMI is $ 1,000 but the employer only pays half of your income

because of the Covid-19 outbreak that struck. Your cash situation will be exceedingly tight,

and if the loan has to be repaid with interest, it will exacerbate the problem. To put it another

way, a loan moratorium is an ointment that can help with liquidity problem crisis produced

by the pandemic, in the same way, that a tiny amount of ointment reduces when we are

damaged, we experience agony.

3.2 Plan the repayment better

Among one of the benefits of a meratorium loan it allows the borrower to reschedule in

order to pay for the forest more effectively. For example, a bank allows A to take out a

moratorium loan for six months, then A can arrange repayment more effectively. If you

9
invest money in the stock market and the stock price is now low, you can wait six months for

the opportunity to sell the stock at a profit and pay interest six months at once.

3.3 No effect on credit score

Moreover, if the borrower is unable to make monthly payments, the moratorium on the

loan does not adversely affect the credit score of the borrower. In short, if you do not make

monthly payments during the loan moratorium period, your credit score and borrowing

capacity will not be affected in the future.

3.4 Interest is not waived

The main disadvantage of the moratorium on loans is that interest is not accrued. loans

are simply deferred, not set aside. In other words, the moratorium on loans requires the

borrower to pay interest and principles to the bank or financial institution during the period of

temporary deferral.

3.5 Increase in loan tenure

In addition, the impact faced by borrowers of a permanent moratorium will result in an

extension of the payment period. therefore, a loan originally scheduled to be repaid in full

within ten years may extend to eleven or twelve years. Basically, the borrower will not be

able to settle the prescribed loan.

3.6 Sudden burden

While it could look that you would not be charged interest for a specified that you will

be paid for a set six months is an example of a length of time. charged interest for six months

in one month, putting pressure on an individual's financial circumstances. To put it another

way, if you in ten days, you must walk 20 miles. but are unable to due to an eight-day hike to

unforeseen circumstances, you will have to complete the task in two days, which we all know

is a challenging task. As can be seen from the above, the benefits and drawbacks of a loan

moratorium should be carefully considered by those considering analyze the reasons raised

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 above before deciding on a moratorium given by a bank or financial institution.

4.0 TYPE OF MORATORIUM

We imagined that this state only happened in the event of financial loss or natural

disasters, but it may also happen as a result of global crises like the COVID-19 epidemic. The

RBI's announcement of an EMI moratorium on terms loans for at least three months during the

global pandemic, even though most banks and financial institutions could continue to operate

their basic EMI schemes for term-based based loans, is one of the most relevant examples of

the moratorium in our context. The RBI has the power to instruct banks to put a halt to either

giving assistance to customers or imposing daily or monthly limit limitations. The Reserve

Bank of India (RBI) requested that the majority of India's leading banks adopt a daily transfer

restriction of INR 50,000 to maintain cash flow in the banks throughout the pandemic. There

are several forms of moratoriums that have been seen in use around the world during various

times of financial and human crises, which we will address further below.

4.1 Independent Moratorium

Banks and financial institutions have the choice of implementing government-imposed

moratoriums or pursuing an opt-in, in which they only allow clients who are in urgent need of

help to participate. Because the government deemed debtors in default, those who were still in

financial hardship six months after the blanket moratorium were encouraged to contact their

bank(s) to explore further options for specialized help. In September 2020, the full moratorium

will be lifted, and a new aid approach will be adopted. As a result, all other borrowers who had

reserved the blanket moratorium and had sufficient financial means will have to commence

repayment on October 1, 2020, to reduce their overall dues and borrowing costs. Since the

health of a credit system is contingent on advances being repaid, it is acute that debtors

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exercise financial castigation to settle the debts due to financial institutions and endeavor to

found a strong loan repayment history.

Even if the advance is not repaid, the bank must start making provisions for it, although

the repatriation may take a year or two. As credit requirements increase, the risk profile also

increases, causing banks to stop issuing loans. Banks must be profitable to continue issuing

loans. If banks are not profitable, the larger economy will suffer.BNM also detected at the

time that debtors made informed decisions about debt organizations built on their ability to

pay because some did not seek a moratorium and did not want a one -size -fits -all approach.

During a virtual press conference on May 11, 2021, BNM governor Datuk Nor

Shamsiah Mohd Yunus said that a blanket loan moratorium would not have been the best way

to re-impose the major national MCO 3.0 because all banks now have fee aid plans available

to borrowers who have already lost their jobs or experienced a pay cut. She went on to note

that debtors can seek information or more support through the several stations that have been

identified, and that, unlike the previous MCO in 2020, virtually all sectors of the economy are

permitted to function. ABM echoed these sentiments in a news statement dated May 12, 2021,

in which it stated that its member banks will continue to provide financial assistance to

distressed borrowers. Borrowers in need of help were advised to contact their banks as soon as

possible to enquire about repayment aid options. More than 150 outreach events have been

held by the banking sector, encompassing debt relief efforts from throughout the nation as well

as direct interactions with various stakeholder groups and SME associations. Banks have

streamlined the application process and made it possible to do it online. Our banking

companies are aware of their borrowers' pain as a result of the COVID-19 epidemic and have

been working closely with the regulator to ensure that trapped debtors continue to get

assistance. Banks have supported borrowers in navigating a challenging economic climate

since the commencement of the COVID-19 pandemic, and they remain dedicated to

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supporting debtors in navigating out of the epidemic, as well as the economy in general.

4.2 Capital Moratorium

The capital moratorium is a fundamental moratorium that has been in effect since

natural disasters such as landslides, earthquakes, and typhoons have had an impact on the

equity characteristics that people have imposed against loans, financial liabilities, and then

with the government, bank, or financial institutions. You can stop making payments for a

certain period and a specific reason if your lender allows you a capital moratorium, which is

comparable to forbearance or deferral. The most common cause is financial issues. Your

lender would prefer to allow you a few months to get back on your feet rather than have you

default and stop paying because the account was sent into collections.

A grace period is similar to a capital moratorium in that both relate to a time during

which you are not compelled to make a payment. The fundamental difference between a

moratorium and a grace period is that a moratorium lasts much longer and that interest can be

charged throughout it. Another difference is that if a lender gives a grace period, it is extended

to all current clients. A moratorium period, on the other hand, must be requested and granted

by the lender by a specific cardholder. A moratorium will not be enforced with certainty.

4.3 Government Imposed Moratorium

As a result of a crisis, we've witnessed the impact of a government-imposed ban on the

general public across the country. COVID-19's pandemic is a basic example that has forced

governments all over the world to impose moratoriums to help the populace. People are having

problems repaying their bills and managing their money as a result of the government's Order

for Movement Control, which tries to stem the epidemic caused by the new coronavirus

(Covid- 19). Numerous individuals and companies have been impacted by the pandemic as a

result of the current migration restrictions, and Bank Negara Malaysia (BNM) has responded

13
by ramping up its efforts and offering several remedies. Individuals and small and medium-

sized businesses have several types of customers/borrowers (SMEs), some of them are

financial respite there in method about a reflex bundle of moratoriums or deferments with

repayments on all loans and financing, principal amount, exception of credit card balances,

beginning April 1, 2020, for a six-month term.

To put it another way, debtors/clienteles providing loans and finance that meet the

requirements for determination will not be required to make any essential payments during this

period, and no late fees or repercussions will be imposed. While the first version of the

program ended in 2020, the Malaysian government announced a new form in July 2021 called

PEMULIH Loan Moratorium to continue assisting individuals in need. The Prime Minister

announced the COVID-19 relief budget of RM150 billion on June 28, 2021, with the profit of

the loan suspension (starting July 7, 2021) as some of the processes. Individuals,

microenterprises, and small and medium-sized organizations, all of whom were eligible to

apply, were denied the opportunity to submit backup paperwork under the six-month

approach. There are also no more foundations and conditions, such as profits loss or reduction,

and no past comprehensive history to obtain if you've lost your job. It's worth mentioning,

too, that eligible debtors can choose among a three-month advance payment for the next six

months, a moratorium, or a 50% decrease in their loan installments.

4.4 Debt Moratorium

This is usually done by governments, and it involves deferring the payment of a debt.

The contract might be between two management agencies or between the government and the

general population. One example is the debt that the general public owes to banks for loans

that must be repaid, which the government might use to provide financial help to the general

public in times of need. Borrowers who have already lost their employment or incomes due to

the COVID-19 outbreak may request that their investment and interest obligations be

14
postponed until the economy recovers and their revenue sources recover.

Malaysians may now apply to banks for a six-month clemency program that will allow

them to make full payments till 2022. If you're now facing financial difficulties or expect to

face difficulties repaying your bank debts in the coming months of this year, the Pemulih

economic package's six-month loan relief announced on June 28 may provide some immediate

financial relief. Borrowers often have two options: a six-month moratorium on their loan,

which means they will not make any payments for six months but will postpone or delay

making payments well after the six-month period has ended, or a 50% reduction in monthly

debt repayments for six months. Anyone in the B40 low-income group, M40 middle-income

group, or T20 high-income group is welcome to attend. Their request for a six-month

moratorium or 50% monthly loan installments above Pemulih will be immediately authorized,

and you will not need to present any subsidiary documentation. The banks will mostly rely on

the self-declarations of borrowers. Previously, Malaysia's banks have agreed to a six-month

blanket payback moratorium for all qualifying borrowers from April to September 30, 2020,

after which the banks would switch to targeted repayment support to assist debtors who had

lost their employment or had their salaries cut.

The prime minister, on the other hand, indicated that the Pemulih package's loan

moratorium option, which went into effect in July 2021, does not involve a condition of

truncated earnings and that there would be no need to check if a debtor has lost his or her

work.

5.0 IMPLICATION OF MORATORIUM DURING COVID-19

On March 18, 2020, the Malaysian government issued an MCO, which stands for

Movement Control Order, as a preventative step against the COVID-19 pandemic. Every

15
sector was closed as part of the 'lockdown,' with the exception of infrastructural services,

supermarkets, wet markets, and multi-purpose establishments that offer everyday needs.

An increase in the employment rates had a significant impact on the whole national

economy, and many businesses and individuals lost their jobs as a result of the increase. It was

decided on 4 May 2020 to issue a CMCO, which stands for Conditional Movement Control

Order, follow by a Recovery Movement Control Order (RMCO), which would be effective

from 10 June to 31 August 2020. This was done in order to ensure the MCO's continued

existence.

Banks played a key role in supporting those in need with the cash flow throughout this

trying era. The Malaysian government and the Central Bank of Malaysia (BNM) formed an

agreement with all banks to grant an effective six-month moratorium on loans or finance

payments to all citizens and SMEs starting April 1, 2020, in terms of balancing the pandemic's

severe economic impacts.

Banks should also address balance sheet issues such as deposit adjustments, looking

for opportunities to refinancing existing debt, obtaining new funding at competitive rates, and

changing their anticipated capital measures. Additionally, the bank's business models should

be modified to reflect new customer conventions, taking into consideration social changes

such as channel preferences, product offers, and financial needs. In a summary, these efforts

would enhance the government's disaster relief programme for vulnerable communities in the

case of future calamities. The following examples are provided only for demonstration

purposes. The length of the tenure extension and the interest/profit charges will be determined

by the loan/interest/profit financing's rate and the remaining tenure.

Credit card payments may be changed into a 3-year term loan with lower interest rates

in order to help customers in better managing their debt obligations. By giving sufficient time-

16
bound repayment flexibility, banks may ensure that borrowers' credit records in the Central

Credit Reference Information System (CCRIS) are not adversely damaged, so protecting their

reputations. A targeted loan moratorium as well as repayment flexibility has been granted to

borrowers who are currently experiencing financial difficulties as a consequence of the

epidemic, which was announced recently. In the event that a debtor loses their job or income,

they may request to the banks for a three-month extension of the moratorium by filing a

repayment flexibility application, which must be approved by the banks. People who have had

their salaries lowered may also seek a reduction in their loan payment amounts for a period of

six months in proportion to the amount of their salary loss.

The loan/financing time is prolonged if the initial payment amount is maintained

following the moratorium/RA plan. If you want to shorten the loan/financing duration, please

contact us so that we may consider alternative arrangements. In these instances, just Maybank

is utilised..

1) What are the Repayment Assistance (RA) programmes available under Maybank's Pemulih

package?

Maybank is providing the following Pemulih RA programmes to help individual clients

throughout the pandemic:

Option 1: a six-month moratorium in monthly payments

Option 2: 50% reduction in monthly installment for 6 months Applicable to:

• Mortgage Loan/Financing-I

• Personal Loan/Financing-I

• ASB Loan/Financing-I

• Education Loan/Financing-I

• Hire Purchase Loan/Financing-I

• Overdraft/Cash Line-I (Option 1 only)

17
Maybank also offers other RA plans which may better suit customer financial need.

18
2) What is the procedure for the 6-month moratorium?

Customers can defer payment of their loans for six months under the moratorium.

Customers do not have to make any payments on their loans or financing during the

moratorium period. No late payment fee will be charged.

3) After my Pemulih RA plans (Option 1 or Option 2 as per item 1) expire, what happens to

my customer loan/financing instalment?

Depending on the choice selected, the customer's monthly payment may stay the same or be

reduced, while the loan/financing term is extended to keep the monthly instalment reasonable.

If clients prefer to keep the tenure, they should contact Maybank, but keep in mind that the

monthly payment will be increased. Their monthly instalment will stay the same for Hire

Purchasing Loan/Financing; the extra interest/profit charged for the payment postponement

will be paid at the end of the tenure together with the final monthly instalment.

4)Will the moratorium/RA plan raise the cost of borrowing/financing for customers?

Yes, using the moratorium/RA plan will raise borrowing/financing expenses since

interest/profit will be levied (but not compounded) while the moratorium/RA is in effect. If the

client can afford their current loan/financing instalment, Maybank will advise them to keep

paying their current loan/financing instalment.

5) How will the moratorium/RA effect current insurance/takaful coverage for customers?

Their insurance/takaful coverage will finish before your new loan/financing duration ends due

to the longer loan/financing tenure (as a consequence of the moratorium/ RA). Furthermore, if

the coverage chosen reduces term coverage, the insurance/takaful coverage will continue to

decrease throughout the moratorium period set forth in your policy/certificate. This implies

that their loan/financing sums will exceed your insurance/takaful coverage, creating a

19
protection gap.

Example 1: A 35-year RM150,000 house loan at a 3.25 percent interest rate (assuming the

overnight policy rate remains stable during the loan lifetime), with 30 years remaining to repay

RM137,499 plus interest, according to Maybank.

Amount: RM150,000

Interest/Profit Rate/Term charges: 3.25%*

Loan/Facility Tenure: 35 years

Remaining Loan/Facility Tenure: 30 years

Current Loan/Facility Balance: RM137,499

As per the current Option 1: Option 2:

payment/repayment 6 months moratorium 50% installment for

schedule 6 months

Monthly installment

- First 6 months RM598 RM0 RM299

- 7th months onwards RM598 RM598 RM598

Total payment RM215,426 RM221,431 RM218,343

(interest increased by (interest increased by

about RM6004) about RM2970)

Total Interest Profit RM77,927 RM83,931 RM80,844

Total tenure from the 30 31.3 30.7

current date

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 a) As per the current payment/repayment schedule

A hypothetical borrower who took a 35-year loan for RM150,000 and still has 30 years of

payments to make, at a variable interest rate of 3.25 percent, is shown in the following

illustration by Maybank of how a six-month moratorium or six-month halved instalments

would affect a hypothetical borrower who took a 35-year loan for RM150,000 and still has 30

years of payments to make, at the variable interest rate of 3.25 percent (assuming it does not

change).

In this situation, the hypothetical borrower has a debt of RM137,499 that must be repaid over

the course of the next 30 years.

i) Total payment:

A= _R x P xN

1 – (1+ R) -N

R = 3.25% / 12

P = 137499

N = 30 x 12

= 0.002708333333 x 137449 x 360

1 – (1+ 0.002708333333) -360

= 372.393125 x 360

0.622310204

= RM215,426

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b) Option 1: 6 Months Moratorium

A borrower would have paid RM83,931 in interest (or about RM6,000 more) if the

moratorium option was used for six months and full monthly instalment payments of RM598

were resumed from the seventh month onwards, with the loan being fully cleared 31.3 years

later rather than 30 years if the moratorium option had been used instead.

Months Opening Balance Payment Principle Intent Closing

balance
137499

1 137499 374 137873

2 137 499 374 138 247

3 137 499 376 138 623

4 137 499 376 138 999

5 137 499 378 139 377

6 137 499 372 139 749

7 137 499 598 378 139 151

8 139 151 598 375 138 553

9 138 553 598 372 137 955

10 137 955 598 376 137 357

11 137 357 598 374 136 759

12 136 759 598 375 136 161

13 136 161 598 374 135 563

14 135 563 598 375 134 965

15 134 965 598 378 134 367

16 134 367 598 378 133 769

17 133 769 598 222 376 133 171

18 133 573 598 222 376 132 573

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c) 50% instalment for 6 months

The additional interest of roughly RM2,970 accumulated if the client merely paid half of the

monthly instalments for six months before resuming full RM598 instalments would lead in an

eventual total cost of RM80,897 paid over 30.7 years.

Months Opening Balance Payment Principle Interest Closing Balance

137 499

1 137 499 299 + 224 374 137 200

2 137 499 299 + 224 374 136 901

3 137 200 299 + 222 376 136 602

4 136 901 299 + 222 376 136 303

5 136 602 299 + 220 378 136 004

6 136 303 299 + 226 372 135 406

7 136 004 598 220 378 134 808

8 135 406 598 221 375 134 210

9 134 808 598 227 372 133 612

10 134 210 598 222 376 133 014

11 133 612 598 222 374 132 416

12 133 014 598 223 375 131 818

13 132 416 598 226 374 131220

14 131 818 598 224 375 130622

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Example 2

How to calculate moratorium?

1. Accumulated and capitalized interest

When a borrower chooses a moratorium, we can usually postpone all payments until the

conclusion of the moratorium. In such instances, the lender calculates and adds (capitalizes)

the accumulated interest to the loan total each month (compounded monthly) (principal). This

means that the new balance plus the previous month's interest will be the basis for calculating

interest each month. This procedure, also known as compounded interest, can be translated.

interest = balance * (1 + r) i – balance

where:

 balance - Opening balance at the beginning of moratorium

 r - Monthly interest rate

 i - Number of moratorium periods

Because the moratorium interest will increase the loan balance, the interest expense will rise

even more in the post-moratorium period, depending on the remaining loan duration.

2. Interest is paid during the moratorium

In this situation, for illustration within the domestic credit ban, the ban applies as it were to the

central installment, which suggests the borrower is still obliged to pay the month to month

24
intrigued. It takes after that the advance adjust will not increment, so the month to month

intrigued to be paid will be the same in each period of the ban.

interest = balance * r

where:

 balance - Opening balance at the beginning of moratorium; and

 r - Monthly interest rate

We must know that the final cost of opting for a moratorium is not simply the interest

calculated (either capitalized or paid) for the moratorium periods. When you start payments

again, the lender will adjust your EMI, loan term, or both, depending on your new balance and

the type of moratorium, which might further raise the interest cost

Moratorium interest calculate

Look on the following moratorium example. Full payment is suspended during the moratorium

and the interest is capitalized monthly on principal balance. In that case, it can calculate a

moratorium interest of RM 100000 for 12 months with 12% interest (which implies 1%

monthly interest) in the following way:

moratorium interest = 100000 * (1 + 0.01)12 - 100000 = RM 12 628.503

Calculate balance at the end of the moratorium

We have RM 100000 balance at the beginning of a 12-month home loan moratorium period

with 12% annual, or 1% monthly, interest. If don't pay interest during the moratorium, that is,

the interest is capitalized on our principal balance monthly, we can calculate the balance in the

following way:

balance after moratorium = 100000 * (1 + 0.01)12 = RM 112 682.503

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Calculated EMI after the moratorium

To calculate EMI in the post-moratorium period, we need to know the loan interest balance at

the end of the moratorium rate, and the remained loan term. For example, balance is RM

300000 and term is ten years (or 120 months) with 12 percent of annual interest (1% monthly

interest), it can calculate in the following way:

EMI = 100000 * 0.01 * (1 + 0.01)120 / ((1 + 0.01)120 - 1) = RM 1434.71

Example moratorium of MAYBANK

MAYBANK loan profile:

Items Amount

Original Loan RM150,000

Interest per annum 3.25%

Loan tenure 35 years

Remaining loan tenure 30 years

Current loan balance RM137,499

The following diagram depicts the distinctions between the existing repayment plan and one

that includes a 6-month moratorium. This assumes that the interest rate does not fluctuate

during the loan term.

26
As we can see, the moratorium has resulted in an additional RM 6,004 in interest. During

the 6-month period, this equates to an additional RM 1,000 in interest. Calculation of

whether or not there is no interest on interest.

If there was no interest on interest, shouldn't the interest be RM 137,499 X 3.5 percent X 12

year = RM 2,406 for the 6-month period? This would only cost you an extra RM 401 every

month.

This is a simple payment model with the following formula.

 Opening Balance for month = Closing Balance of previous month plus monthly

interest.

 Monthly Closing Balance = Opening Balance – Payment.

 The monthly interest is calculated using the previous month's Closing Balance. The

monthly interest rate is 3.25 percent every month for a period of 12 months.

6.0 DISCUSS AND JUSTIFY SOLUTIONS

Maybank has done its utmost to provide solutions by creating numerous financial relief

offerings during this epidemic period with negative economy and society life under the

Movement Control Order (MCO). If you're reading this, you're presumably interested in

Maybank's budgetary financial reliefs or moratorium, which was issued in response to Bank

Negara Malaysia's remark (BNM). As of April 1, 2020, all conventional and Islamic consumer

and SME Ringgit Malaysia denominated loans/financing (excluding Hire Purchase

Loan/Financing-i, Credit Card/Credit Card-i, Charge and Corporate Card) that have not been in

arrears for more than 90 days will be granted an automatic 6-month moratorium.

Malayan Banking Bhd (Maybank) has already taken the lead in providing financial

(help) relief to its clients who have been affected by the current Covid-19 pandemic, including
27
funding restructuring and rescheduling. The assistance also includes a six-month delay on loan

repayments, according to a recent Maybank release. Maybank stated, "The financial assistance

will be offered to both its commercial and SME clients, as well as individuals afflicted by the

current crisis, and will be considered on a case-by-case basis" (Syafiqah Salim, 2020, March

17). Maybank president (group branch) and CEO Datuk Abdul Farid Alias said in a statement

that the financial services company recognises that the virus epidemic has impacted some of its

clients in various industries and individuals (Syafiqah Salim, 2020, March 17). "As a financial

partner, we'd like to do our part to help them avoid more agony during these trying times, in

line with our goal of empowering financial services," Abdul Farid said (Abdul Farid, 2020,

March 17).

Maybank Company is also putting in more efforts to address the moratorium issue.,

(Yin, 2021) Maybank emphasized the rescheduling and restructuring (R&R) option, your

original loan/financing repayment terms and condition will be modify to offer temporary

financial relief. However, Credit cards, charge cards, corporate cards, and flat-rate interest

personal loans/financing are not eligible for this assistance. Maybank stated each application

will be evaluated on a case-by-case basis. The bank will work closely with you to design a

repayment plan that is suited to your unique situation. To apply or contact the bank, customers

have three options: email, online application, or phone call.

Next solution by Maybank is Financial Management and Resilience Programme

(URUS) for B50 Individual. URUS is a comprehensive assistance package that includes both

repayment help and development assistance, comprising personalised financial plans, financial

education programmes, and avenues to supplement incomes and obtain other development

support via referrals to the Social Synergy Network. Following the declaration issued by the

28
Malaysian government on October 13, 2021, Maybank said that all qualified B50 individual

customers have the option to enrol in the Financial Management and Resilience Program

(URUS), a newly developed programme that we have co-created with our clients, Agensi

Kaunseling and pengurusan kredit (AKPK) also collaborating on this. This is in addition to the

PEMULIH Repayment Assistance which is currently being offered (Maybank2u, 2021). For

B50 customers who are eligible, we are offering the 3-month interest/profit waiver only and 3-

month interest/profit waiver plus reduced monthly instalments of up to 24 months (inclusive of

the 3-month interest/profit waiver period).

Lastly is Maybank handled all repayment assistance applications. In a statement

released on October 15, 2020, Malayan Banking Bhd announced that more than 99 percent of

the repayment assistance applications it had handled had been approved. (star, 2020) The bank

said in a statement on Tuesday that these include applications from both individuals and SME

clients requesting further financial assistance following the conclusion of the six-month blanket

lending moratorium on September 30. Of the accepted applications, around 38% have been

given a further moratorium on loan/financing repayment. The CEO of Maybank said “Maybank

is always ready to serve our clients, and those in need may still contact us to discuss repayment

solutions according to their current financial needs,”

CONCLUSION

Overall, the local banking industry has struggled since the Covid-19 outbreak began,

with many banks reporting lower net interest income, higher allowances for impaired loans

amid weaker economic prospects driven by the Covid-19 pandemic, and automatically. loan

modification losses, among other factors. There is no denying how important it is for creditors

to exercise financial discipline in repaying bank arrears and try to establish a strong track record
29
of loan repayment performance, as the survival of the credit system depends on the loans being

repaid. Keep in mind that if other universal restrictions are imposed, the money will not be

enough to cover the outflow. In the current situation, the outflows are mostly depositors who

have been hit by the Covid19 outbreak and are withdrawing their funds. Given the above

implications, the best way to address the current pandemic situation is to provide targeted

reimbursement assistance, which should be provided transparently, fairly and equitably to those

who really need it, either through a targeted moratorium extension or reimbursement. flexibility

options. We must keep in mind the importance of maintaining a stable financial sector that can

play a counter -cyclical role in aiding economic development. Since the onset of the Covid-19

outbreak, banks have assisted borrowers in weathering the difficult economic climate. They

remain committed to assisting borrowers and the economy in general in navigating out of the

epidemic.

REFERENCES

Aziz, A. R. (2020). Pengangguran dalam kalangan tenaga kerja semasa wabak Covid-19.

Malaysian Journal of Social Sciences and Humanities (MJSSH), 5(11), 1-9. Retrieved on

13.12.2021 from doi: https://doi.org/10.47405/mjssh.v5i1 1.53 9

Babulal, V. (2021, May 29). https://www.straitstimes.com/asia/se-asia/full-lockdown-

formalaysia-from-june-1-14. Retrieved on 14.12.2021 from New Straits Time:

https://www.nst.com.my/news/nation/2021/05/694109/government-urged-backlockdown-

loan-moratorium-cash-aid-incentives

Bank Negara Malaysia. (2020, July 29). Banks to provide loan repayment flexibility to

borrowers affected by COVID-19. Retrieved on 16.12.2021 from Central Bank of Malaysia:

https://www.bnm.gov.my/-/banks-to-provide-loan-repayment-flexibility-to-
30
borrowersaffected-by-covid-19

Bank Negara Malaysia. (2020, April 30). Reiteration of BNM statements on the moratorium.

Retrieved 14.12.2021 from Bank Negara Malaysia Central Bank of Malaysia:

https://www.bnm.gov.my/-

/ulangan-kenyataan-bnm-mengenai-moratorium

Central Bank of Malaysia. (2021). BNM's fund for SMEs: all economic sectors (AES).

Retrieved on 17.12.2021 from Central Bank of Malaysia:

https://www.bnm.gov.my/documents/20124/2294076/AES_Eng.pdf

Central Bank of Malaysia. (2021). BNM's fund for SMEs: targeted relief and recovery facility

(TRRF). Retrieved on 18.12.2021 from Central Bank of Malaysia:

https://www.bnm.gov.my/documents/20124/2294076/Brochure_TRRF_EN.pdf

Chung, C., & Lai, A. (2021, May 31). PM announces Pemerkasa Plus aid package worth

RM40bil. The Star. Retrieved on 18.12.2021 from

https://www.thestar.com.my/news/nation/2021/05/31/pm-

announces-pemerkasa-plus-aidpackage-worth-rm40bil

Kana, G. (2020, July 18). 'Honeymoon' over borrowers. Retrieved on 19.12.2021 from The

Star: https://www.thestar.com.my/business/business-news/2020/07/18/honeymoon-over-

forborrowers

Mohamad, A. A. (2020, July 12). A step-by-step approach is appropriate to address the issue

of the moratorium. Retrieved on 11.12.2021 from Utusan Borneo Online:

https://www.utusanborneoonline.com.my/2020/07/12/pendekatan-bersasar-langkahwajar-

tangani-isu-moratorium

Maybank2u. (2021). Maybank's Covid-19 Financial Relief Scheme. Retrieved on 19.11.2021

31
from https://www.maybank2u.com.my/maybank2u/malaysia/en/personal/announcements/

2020/March/announcement_financial_relief_scheme.page.

star, t. (2020). Maybank: Over 99% of applications processed for repayment aid approved.

retrieved on 19.11.2021 from

https://www.thestar.com.my/business/business-news/2020/10/20/maybank-over-99-of-

applications-processed-for-repayment-aid-approved.

Yin, A. C. (2021). Maybank Extended Moratorium: Repayment Assistance Packages Including

Rescheduling And Restructuring (R&R). retrieved on 19.11.2021 from

https://ringgitplus.com/en/blog/bank-news/maybank-extended-moratorium-repayment-

assistance-packages-including-rescheduling-and-repayment-rr.html.

APPENDIX

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