Bank Negara: No directive to raise car financing interest rates

Posted on 2 April 2014 - 05:37am

Liew Jia Teng
sunbiz@thesundaily.com

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KUALA LUMPUR: Bank Negara Malaysia (BNM) yesterday clarified that it did not give any official or authoritative instruction to the banks to increase interest rate on hire purchase financing for cars.
"There is no directive from Bank Negara to the banks to raise car financing interest rates," BNM said in a statement yesterday.
On Tuesday, a local daily reported that the interest rates on hire purchase loans had increased quietly by some 40 basis points for both national and non-national cars since two weeks ago.
It reported that loans for the purchase of national cars have increased from 2.7% to 3.1%, while the loans for buying non-national cars have gone up from 2.4% to 2.8%.
It was also reported that the interest rate on car loans was an "order" by the central bank, partly due to the concerns on the rising non-performing loans (NPL) for motor vehicles.
Although the central bank did not give any directive to increase car loans rates, BNM said that banks can set their own interest rates on hire purchase loans.
"Financial institutions set their own lending rates determined by various factors including a financial institution's assessment of a borrower's credit standing, market funding rates and competitive considerations," it said.
Attempts by pressmen to obtain comment from BNM Governor Tan Sri Dr Zeti Akhtar Aziz at the launch of Iclif's Asian Leadership Index (ALI) Report in Kuala Lumpur yesterday were unsuccessful.
The central bank's latest statistics showed that the impaired loans for the purchase of motor vehicles stood at RM2.33 billion in February 2014, a significant increase of 8.3% from RM2.15 billion in January 2014, as well as an increase of 21% from RM1.93 billion a year ago.
The amount of non-performing motor vehicle loans has been fluctuating between RM1.68 billion to RM1.98 billion, from late 2010 to the first half of 2013.
BNM had in January 2014 kept the overnight policy rate, which is used as a benchmark for banks to determine interest rates, unchanged at 3% at its first Monetary Policy Committee meeting of the year.
Household debt continued to grow to 86.8% of gross domestic product by end of 2013 albeit at a lower rate. Growth in household debt slowed to 11.7% in 2013 from 13.5% in 2012.