By Aidila Razak
Bank Negara Malaysia (BNM) governor Zeti Akhtar Aziz today said that the central bank is “closely monitoring” the levels of debt undertaken by low-income households in order to avoid a subprime crisis unfolding in the country.
“Households with incomes less than RM3000 (a month) and below are increasingly over-leveraging, borrowing not for assets like houses or cars, but taking up personal loans.
“This is where the concern arises and we are taking up this issue with agencies like cooperatives etc who lend a significant amount (to these households),” she told reporters.
Speaking after presenting BNM’s annual report at its headquarters in Kuala Lumpur, she said that lower income households only make up 11 percent of the portfolios of commercial banks.
She said that while those with a steady income stream should not be deprived of credit, measures are being taken to ensure sustainability.
“If too high a percentage of earnings is used to sustain debt, it is not sustainable. In the United States, this caused the subprime crisis.
“It is not a concern now, but could be in the future so we are taking action now,” she said.
The actions, she said, includes working with non-bank lending agencies to take up responsible lending guidelines.
The non-bank agencies who provide credit services include cooperatives.
Personal financing on the rise
According to BNM’s Financial Stability and Payment Systems Report 2012 launched today, personal financing by non-banks grew at a rate of 30 percent, more than three times more than banks.
Personal financing makes up 17 percent of household debt, up by one percent compared to 2011.
New loans to households last year represents more than 80 percent of gross domestic product at RM166.3 billion.
Growth in banks lending moderated to 11.6 percent, mainly on housing loans, but non-banks recorded higher lending growth at 23.4 percent.
However, non-performing loans for banks was lower at an improved 1.5 percent while there is a decline in revolving balances for credit cards.
Non-performing loans for non-bank lending agencies is at a lower 1.6 percent.
“There has been no deterioration of the quality of loan portfolios. If people are credit worthy, they deserve to have access to credit,” Zeti said.
You must be logged in to post a comment.