Can banks abolish accrued interest on hire purchase loans?

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Banks Can Abolish Accrued Interest on Hire Purchase Loans and Profits on Fixed-Rate Islamic Financing

Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz has stated that it is feasible for financial institutions to abolish accrued interest on hire purchase (HP) loans and profits on fixed-rate Islamic financing during the six-month loan moratorium period. Drawing on his extensive banking background of over two decades, Zafrul believes such a measure would not significantly affect the financial sector. He has expressed his hope that Bank Negara Malaysia (BNM) and other financial institutions will seriously consider this proposal, anticipating a positive impact on the public during these challenging times.
Feasibility Based on Banking Experience

Tengku Zafrul, with more than 20 years of experience in the banking industry, asserted that abolishing accrued interest and profits during the moratorium is "doable." He conveyed this sentiment during an interview, emphasizing that this period requires collective effort from banks, industries, and the government to support the public. He indicated that this move is a necessary measure given the unprecedented nature of the Covid-19 outbreak and its economic consequences.
Ministry of Finance Initiates Stakeholder Discussions

The Ministry of Finance (MOF) has actively engaged with various stakeholders to explore solutions for the accrued interest issue. While many banks have already offered loan deferments without imposing additional interest or compounded profit, this flexibility does not extend to all loan products. The MOF's proactive discussions aim to address the specific concerns surrounding HP loans and fixed-rate Islamic financing, seeking a resolution that benefits borrowers.
Addressing Public Confusion and Anxiety

Bank Negara Malaysia (BNM) had previously issued clarifications regarding the six-month moratorium for HP loans and fixed-rate Islamic financing, acknowledging the confusion and anxiety caused by its announcements. BNM reiterated that while payment deferment is automatic, there would still be accrued interest or profit, a point that led to public backlash. The central bank's frequently asked questions (FAQs) aimed to clarify procedural requirements under the Hire-Purchase Act 1967 and Shariah, while reaffirming its initial stance on accrued interest.

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Can banks abolish accrued interest on hire purchase loans?

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