PIDM Guide in Malaysia (Perbadanan Insurance Deposit Malaysia)

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Perbadanan Insurance Deposit Malaysia (PIDM) as known within Malaysia, is a government agency or lawful body that is created under the Malaysia Deposit Insurance Corporation Act (MDIC act) in 2005. Around the globe, PIDM is also known as Malaysia Deposit Insurance Corporation (MDIC). When PIDM was established in 2005, the main purpose was to regulate the national deposit insurance system in Malaysia and protecting depositors. Since early 31 December 2010, the aim of PIDM was broadened to manage the Takaful and Insurance Benefits Protection System (TIPS) to give owners of takaful certificates and insurance policies the necessary protection.

Who are the members of PIDM?

Member banks and insurer members are institutions that make up PIDM memberships. All commercial banks that are registered under the Financial Services Act (FSA) 2013 and all Islamic banks licensed under the Islamic Financial Services Act 2013 as well as locally incorporated subsidaries of foreign banks enforced in Malaysia are member banks of PIDM. One way to identify if a bank is a member bank of PIDM is to search for the sign at the front of every bank entrance as membership is denoted  by the decal with a blue and orange logo sign stamped by the initials “PIDM” on the left.

 

Who pays for PIDM’s protection?

To enjoy the services and protection provided by PIDM as a takaful certificate/insurance policy owner, there is no requirement to pay any premium to PIDM. It is the member banks and insurer members that pay annual premiums and levies to PIDM.

 

What is the mandate of PIDM?

One of the mandates of PIDM is to execute and govern a deposit insurance system and a takaful and insurance benefits protection system. It also dispenses insurance against the loss of fraction or all deposits for which a deposit-taking member is liable and to give protection against the loss of fraction or all of takaful or insurance benefits for which an insurer member is accountable. PIDM also presents incentives for sound risk management in the financial system and contributes to the balance in the financial system. Through his, PIDM aims to take appropriate actions to reduce costs in the financial system.

 

How does PIDM function in stabilising the financial system?

PIDM is the final authority of member banks and insurer members in Malaysia. PIDM has a spectrum of legislative powers to mediate early in afflicted member institutions to diminish any plausibility of member instituition failure. If however a member instituition is no longer held viable by Bank Negara, PIDM can take position to manage the the institution or take measurable and appropriate steps to fix member institution while mimimising costs to the financial system.

 

Who governs PIDM?

The people who govern PIDM are a nine-member Board of Directors appointed by the Minister of Finance from both the public and private sectors. A non executive Chairman leads the Board while the Governor of Bank Negara Malaysia has their own representatives, the Secretary of Treasury, two other Directors from the public sector and four directors from the private sector which of three have applicable banking and financial sector experience.

 

What are institutions that are not member banks of PIDM for Deposit Insurance System?

Institutions that are not considered member banks of PIDM in the Deposit Insurance System (DIS) include investment banks, overseas branches of member banks, development financial instituions and cooperative banks. Any non-bank financial intermediaries like provident and pension funds, cooperative societies, housing credit institutions, and building socieities that are not managed by Bank Negara Malaysia are non member banks of PIDM as well.

 

What is Takaful and Insurance Benefit Protection System? (TIPS)

TIPS is a governance system established for the protection of owners of takaful certificates and insurance policies from the loss of their eligible takaful or insurance benefits in the unfortunate event that the insurer member fails. Takaful operators and insurance companies are also known as “insurer members” and are considered member institutions of PIDM.

Deposit that meet the requirements for protection include current and savings desposit accounts, fixed deposits, joint acounts, trust accounts and foreign currency deposits. Deposits that do not meet the requirement for protections on the other hand are deposits not payable in Malaysia, inter-bank money market placements, negotiable instruments of deposits (NIDs) and other bearer deposits, repurchase agreements and unit trusts.

Which institutions are not member banks of PIDM under the Takaful and Insurance Benefit Protection System (TIPS)?

Institutions which are not member banks of PIDM under TIPS include reinsurance companies and retakaful operators, international takaful operators licensed under the Islamic Financial Services Act (IFSA) 2013, financial guarantee insurers such as Danajamin Nasional Berhad, offshore insurance companies and other players in the insurance industry like insurance brokers and adjusters.

What are the member institutions’ duty?

Member institutions are required to pay annual premiums and levies to support the Deposit Insurance System (DIS) and Takaful and Insurance Benefits Protection Systems (TIPS) and to comply and observe to the regulations, terms and conditions of membership set by PIDM.

What about the closing of membership?

Unless membership is voluntarily terminated by PIDM, membership is continous. However, if membership is declared by Bank Negara Malaysia that it is bankrupt or about to become bankrupt, membership with the approval of the Minister of Finance will be terminated.

Cancellation of membership?

Membership will be cancelled if Bank Negara Malaysia has taken back member institution’s license or if member instituion has resigned it’s license to Bank Negara Malaysia.

Coverage

RM500,000 Maximum limit protected benefits for General and Family Solidarity Takaful and Life Insurance. Some of the benefits protected are loss of or damage to eligible property, death and related benefits, permanent disability, critical illness, disability income, medical expenses, refundable and prepaid premiums.
PIDM has also released a new project called “PIDM Smart Money Project”. PIDM has educational programmes to promote financial awareness and literacy on savings through advertising and campaigns. For further information, PIDM has a toll free information line at 1-800-88-1266 available from Monday to Fridays between 8.30am and 5.30pm and can also be contacted through email at [email protected]

 

Al Rajhi Personal Loan

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al-rajhi-1

Background

Al Rajhi Bank is one of the world largest Islamic bank from Saudi Arabia. This bank reached Malaysian shore on 2006 as part of it’s internationalization effort.

Al Rajhi Personal Financing-i
Profit Rates start from 3.50% p.a. to 8.99% p.a
From RM 5,000 up to RM 150,000 or 5 times monthly salary financing available
Maximum 7 years repayment
No guarantor needed
Fast approval
Minimum of 25 years old and RM 4,500 monthly income

Al Rajhi Personal Financing-i is an unsecured personal loan where no guarantor and collateral is needed which is 100% Shariah compliant. Al Rajhi’s personal loan is based on commodity trading.  The guarantor requirements however do subject to applicant’s credit score.

Al Rajhi personal financing-i profit rates start from 3.50% p.a. to 8.99% p.a. This personal loan offers up to 5 times applicant’s salary or RM 150,000 (the lower amount) financing however this will also depends very much on the person’s credit score. The minimum someone can borrow is RM 5,000.  Borrower will have options up to 7 years repayment. This loan features a speedy application, where applicants will know the application status in 24 hours upon complete submission.

Charges

There are no application and processing fees currently. However there will be a 0.5% stamp duty fees while Takaful insurance would be compulsory for the loan. Takaful Insurance will depends on age and tenure of financing by the applicants.  This loan is subjected to Bursa fees. GST charges are also applicable for the service fees.

Eligibility

Age for age wise, Al Rajhi requires a much high 25 years age for loan application. Applicants should not be over 58 years old at loan tenure. This loan also has a minimum RM 4,500 monthly gross minimum salary for applications which is considered high for Malaysian standards.  Overall, the standards set by Al Rajhi bank is quite high and thus is may be quite hard for average Malaysians to fulfill the loan requirements.

Documents required

  • Copy and photocopy of IC ( Front and back)
  • Most recent 3 months payslip and bank statement

 

Al Rajhi Personal Financing-i repayment table is available below

al-rajhi-personal-financing

 

Base Rate Malaysia

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Sometime early this year, Base Rate (BR) was implemented to replace the previous Base Lending Rate (BLR) system. Under the Base Rate system, this rate will be the main reference rate for new retail floating rate loans. Banks in Malaysia can also determine their interest rate based on a formula that was set by the Central Bank.

Unlike the previous Base Lending Rate system where Bank Negara sets the rate based on how much it costs them to lend money to other financial institutions, the rate under Base Rate is based on the Overnight Policy Rate (OPR) set by the central bank of Malaysia.

Why It Was Changed?

The Base Rate system encourages greater transparency from banks in Malaysia and it will also help customers to make better financial decisions. Some banks such as Maybank and Public Bank that are strong in consumer financing will have an initial competitive edge over other banks in offering more competitive and attractive base rates and effective lending rates (ELR) to their customers. In the previous base lending rate system, some banks were found lending out money below the base lending rate in order to attract more customers and to boost their loan growth. However, customers are no longer able to borrow money below the base rate under the new base rate system.

Banks Base Rate and Their Effective Lending Rates

Below is a list of banks in Malaysia along with their base rate and effective lending rates:

  • Affin Bank – 3.8% Base Rate, 4.75% Effective Lending Rate
  • Alliance Bank -3.82% Base Rate, 4.65% Effective Lending Rate
  • Am Bank – 3.8% Base Rate, 4.45% Effective Lending Rate
  • CIMB Bank – 3.9% Base Rate, 4.65% Effective Lending Rate
  • Hong Leong Bank – 3.69% Base Rate, 4.8% Effective Lending Rate
  • Maybank – 3% Base Rate, 4.55% Effective Lending Rate
  • Public Bank – 3.52% Base Rate, 4.45% Effective Lending Rate
  • RHB Bank – 3.65% Base Rate, 4.65% Effective Lending Rate
  • Citibank – 3.65% Base Rate, 4.55% Effective Lending Rate
  • HSBC Bank – 3.50% Base Rate, 4.85% Effective Lending Rate
  • OCBC Bank – 3.72% Base Rate, 5.05% Effective Lending Rate
  • Standard Chartered Bank – 3.52% Base Rate, 4.52% Effective Lending Rate
  • United Overseas Bank – 3.85% Base Rate, 4.75% Effective Lending Rate

How Does It Affect the Borrowers?

This new change from base lending rate system to base rate system will only have minimum impact on the borrowers. For example, the rates offered by Maybank in the previous base lending rate system was 6.85% and the BLR -2.40%. This means that the borrower only needs to pay 4.45% on the mortgage. Under the new base rate system, Maybank will have to reveal its base rate and it must also disclose its margin which will be then used to determine the effective lending rate. Maybank’s effective lending rate was set to 3.20% and the interest presented here is +1.35%. This means that the effective lending rate that the borrower needs to pay on the mortgage is 4.55%, another 0.10% extra. Ultimately, the effective lending rate will be used to determine how much the borrower will have to pay the mortgage. Below is an example on how much a borrower will need to pay for a loan amount of RM550000 with loan tenure of 30 years:

  • Reference Rate – 6.85% Base Lending Rate , 3.20% Base Rate
  • Interest Rate – (-2.40%) Base Lending Rate, (+1.35%) Base Rate
  • Effective Lending Rate – 4.45%  Base Lending Rate, 4.55% Base Rate
  • Monthly Instalment (RM) – RM2770 Base Lending Rate, RM2804 Base Rate

Please note that the examples shown above may vary in its effective lending rate if the base lending rate and base rate changes. With this new base rate system, the borrower needs to pay an additional RM34 per month. This additional figure amounts to RM12240 more by the end of the loan tenure.

Although some of the banks can set higher base rate compared to other banks, these banks can also offer lower effective lending rates to attract customers and to remain competitive. For example, Public Bank has a base rate of 3.65% and Maybank has a base rate of 4.55%. Public Bank can then offer a low effective lending rate of 4.45% while Maybank maintains their effective lending rate at 4.55%. In this situation, this means that Public Bank is willing to take a smaller profit margin so that they can remain competitive.

Base Rate Effect on Banks

So far, banks and mortgage providers are still going on with their usual business because the change from base lending rate to base rate has not significantly increased the effective lending rate. When it comes to the actual interest rates, the borrowers are still paying almost the same amount in the base rate system as they did in the base lending rate system. However, some of the experts said that this switch is beneficial as it will create a better transparency between the banks and their borrowers. Consequently, this will lead to greater competition among the banks in Malaysia to provide a huge range of loan options for their customers. According to Bank Negara Malaysia, the base rate system will also properly reflect the costs arising from monetary policy and market funding conditions. This will also encourage the banks and financial institutions in Malaysia to have greater efficiency and discipline when pricing their retail financing products.

However, this change may impact on some of the smaller financial institutions as they will start to lose out in the race to attract more borrowers due to the flexibility to determine their respective benchmark rates. Some of these smaller financial institutions may not have much leeway and resources to offer competitive rates when compared to bigger and more established banks and financial institutions.

Base Rate Effect on Property Demand

The switch from base lending rate to base rate is unlikely to have any effect and impact on consumer demand for property. In fact, the base rate system may even benefit home buyers and property investors for them to make better buying decisions because of the transparency in reference rate. These home buyers and property investors are also able to make more sound financial decisions by looking through an array of different loan products offered by various banks and financial institutions.