The Finance Ministry has welcomed the move by banks to conduct stringent scrutiny on loan borrowers' repayment capacity effective Jan 1.

Deputy Finance Minister Dr Awang Adek Hussin, however, said the tight procedures should not be at the expense of applicants who are really eligible for loans to start a business.

"The strict evaluation must be done fairly and objectively in order not to cause problems to genuine borrowers," he told reporters when asked to comment on media reports today that banks would tighten loan evaluation procedures to gauge borrowers' repayment affordability.

Under the new set of guidelines issued by Bank Negara yesterday, banks must take into account the applicants' take-home income after mandatory deductions like Employees' Provident Fund, schedular income tax deduction and other financial commitments when assessing a loan applicants' repayment capacity.

Awang Adek said the ministry firmly held to the fundamental principle that borrowers must repay their loans as specified in the repayment schedule.  

"I admit that many borrowers fail to settle their loans. However, the defaulters' percentage is still low at two percent.

"Nonetheless, pre-emptive measures are inevitable, only the assessment must be

done fairly and accurately.

"The government don't want to see the strict procedures causing problems to the people to the extent that eligible applicants have to turn to other alternatives like borrowing from loan sharks only to worsen their financial woes," he said.

Prior approval from Bank Negara

On commercial banks intending to venture abroad, Awang Adek said that it was a welcome move to increase profit apart from domestic operations revenue.

"The move is in tandem with the current trend that if you want to move forward, you must be prepared to compete globally," he said.

Bank Islam Malaysia managing director Zukri Samat said on Monday that the bank planned to expand operations to foreign countries, particularly to Muslim-majority nations like neighbour Indonesia and Bangladesh.

The deputy minister said banks intending to widen their operations to foreign countries must obtain prior approval from Bank Negara and the financial authorities in the recipient nations.

Bank Negara is the central governing authority for commercial banks and finance companies in Malaysia.

Earlier, Awang Adek launched the ‘One Tabung Haji Account, One Bachok’ programme at the Pilgrims' Fund Board (Tabung Haji) office.

- Bernama