KUALA LUMPUR, July 8 – RHB Research expects Bank Negara Malaysia’s measures to curb rising household debt to encourage responsible lending on uncollateralised financing.
Last Friday, the central bank announced that has will implement, with immediate effect, a set of measures to curb the rising trend of household indebtedness and reinforce responsible lending practices by key credit providers.
Among the measures were limiting maximum tenure of personal loans to 10 years and property financing to 35 years, and prohibition on the offering of pre-approved personal financing products.
Also included was the setting of prudent debt service ratio that allowed sufficient buffer to deal with income volatility and other costs.
“We are of the view that this moderation is a positive move towards inculcating more responsible lending or borrowing in personal financing (PF), and may address the build-up in leverage, which reduces the buffer to any income shock,” it said in a research note today.
RHB Research said the impact on the new policy would be felt more intensely by non-bank financial institutions (NBFI), which are more heavily dependent on PF.
“We see a greater impact on NBFIs, which rely heavily on PF.
“We also see a marginal impact on life insurers with bancassurance exposure to mortgages and PF,” it added.
RHB Research has downgraded the fair values of Malaysian Building Society Bhd and Aeon Credit to RM3.10 and RM15.10, respectively, which have been trading at premium valuations.
– BERNAMA
