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Don't Stop Lending, Najib Tells Banks

By Sunday May 10th, 2009 No Comments

KUALA LUMPUR, May 11 (Bernama) — Prime Minister Datuk Seri Najib Tun Razak called on banks to continue lending during difficult economic times and not to pull back loans from viable customers.

“Without credit, businesses and companies will not be able to survive,” he said in his opening keynote address at the 13th Malaysian Banking Summit organised by the Asian Strategic & Leadership Institute here today.

Banks, Najib said, should not withdraw credit without justifiable cause.

According to him, the domestic banking sector has healthy balance sheets and “is well buffered with the capacity to provide credit to the private sector”.

Najib said the banking sector is well capitalised with a risk weighted capital ratio of 13.4 percent at end March 2009 and with RM44.6 billion as buffer against loss.

“There are no systematic risks identified to our banks,” he said.

Najib, who is also the Finance Minister, said as at March 2009, the net non-performing loan (NPL) ratio stood at 2.2 percent.

“With these large capital buffers, our financial sector remains resilient,” he said.

However, Najib said total applications for new financing in the first quarter of 2009 declined by 3.5 percent.

This might due among others to lower applications from businesses, which could be scaling back or delaying large-scale investment and expansion plans because of the weaker outlook, he said.

Najib said total approvals granted for new financing also moderated slightly to RM58.9 billion for the three-month period while disbursements dropped by 2.3 percent to RM148.1 billion.

“Our banks must work with government to promote economic growth and support the private sector as the primary engine of growth,” he said.

During this challenging period, loans to small and medium enterprises should not be curtailed and rural banking services must also be improved, Najib said.

“By doing so, people in rural areas can also benefit from modern banking and financial services and have access to credit,” he said.

Najib said the business community has raised concern with the speed and timeliness of the approval of loans and efficiency of the supply of banking services.

“Banks have tended to become over-cautious today,” he said, adding that this had resulted in delays in the approval process when more unnecessary steps that required more information were adopted.

“The slowness of approvals will have a significant impact on economic activity. I therefore hope that banks will expedite loan approvals so as not to impede economic recovery,” he added.

Source : Bernama

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