Moratorium in spotlight again

THE government’s recent announcement that it will now implement an auto-approval mechanism for the moratorium on loan repayments for those in the B40 group as well as micro and small and medium enterprises (SMES) has critics up in arms, calling it a populist move.

They argue that the B40 particularly do not form a substantial part of most banks’ loan portfolio anyway, so this move is relatively insignificant.

While it is generally true to a certain extent that those in the lower-income bracket do not borrow in huge amounts compared to those in the higher-income brackets simply because they do not generally buy expensive big-ticket items, banks will also have to take a hit somewhere along the line, however small the impact is.

To be sure, this week’s announcement, which singled out the B40 and SMES, is not entirely new as even before this, individuals and businesses who cannot make good on their loans could approach the banks for help.

Which brings us to the more pertinent issue of banks and their future earnings – most lenders yesterday announced financial results that were very much lower than the previous years’ results.

No surprises there as banks, like most businesses, are also getting hit by the Covid-19 pandemic.

With the targeted moratorium and, now, this move in place, coupled with consumers tightening their belts due to the ongoing pandemic, one can almost safely say that the earnings of banks will continue to be impacted.

So far, for this financial year, most banks have not declared any dividends – a first for many.

Will they do so in the fourth and coming quarter?

Only time will tell.