Banks to ease financial burden of customers

Ivan: Banks can ease the financial burden by introducing more “friendly” package or reform. But it will never teach the people about how to do a proper financial plan. This will lead to a viscous cycle and end up with another financial crisis! Please read the below for more details:

Finance companies are resorting to restructuring car loan repayments to help ease the burden of customers with heavy financial commitments.

At least three major banks will announce their hire-purchase loan restructuring plans soon.

A senior manager of a prominent local bank with a substantial volume of hire-purchase customers said that given the current economic scenario, where prices of fuel and food had increased, many customers would be burdened by the high repayment plans that they had signed previously.

Finance companies could not rule out that some customers might find it difficult to service their monthly instalments, he said.

“We expect that for next year there will be more repossession orders given, but it won’t be a drastic increase,” he said, adding that his company issued a monthly average of 2,500 repossession orders.

Most banks and finance companies will try to assist any customer whom they feel could fail to meet their monthly instalments.

The move is expected to bring cheer to thousands of hire-purchase customers, especially those paying high monthly instalments for their car loans.

A Perodua Kelisa owner, Jen Neoh, 29, welcomes an option to restructure her car loan, as it would ease her financial burden.

“I think it’s better to be in debt with a bank, rather than borrowing from friends, family or even loan sharks,” she said.

Neoh, who now pays almost RM400 for her monthly instalments, said she would be comfortable paying about RM200 instead.

A public relations manager in a large bank here said her bank was now very selective with new approvals for hire-purchase loans.

“And we have also started calling customers to help restructure their hire-purchase agreements to help them make ends meet,” she said.

Loan restructuring is commonly done by extending the account holder’s repayment period to lower the monthly instalment that needs to be paid.

“Many factors affect how much the refinancing would affect the new monthly repayment amount,” said a head of retail collection in Kuala Lumpur.

He said they included how much loan was taken in the first place and the customer’s financial status.

“But if they can’t pay, reduction is not a solution. They can always surrender their cars. But we will try to help them so that they won’t have to,” he said.

Federation of Consumer Associations adviser Datuk Hamdan Adnan said Bank Negara must step in and help consumers who have been threatened with having their vehicles repossessed.

“Banks always claim they are customer-friendly. But in reality, they exploit some customers,” he said.

Inflation – Blood Test Fee Hikes

I sent my dad to perform a regular blood test this morning at BP Lab. The testing fees were RM 70 on last December. My Dad and I got a shock when the nurse informed us we need to pay RM 150 for the same blood test packages!! The reason given is “Oh, petrol price increases, all sort things are more expensive, we have not choice”.

Petrol price increased 40%, but blood test fees increase by more than 100%. It is a good way to get more profit margin for the company, but it is too heavy for many people.

Crude Oil; Cruel Price

Not everybody is paying higher prices for oil

HALF of the world’s population enjoys fuel subsidies. This estimate, from Morgan Stanley, implies that almost a quarter of the world’s petrol is sold at less than the market price. The cheapest petrol is in Venezuela, at 5 cents per litre. That makes China’s pump price of 79 cents seem expensive, but even this is a bargain compared with $1.04 in the United States and $2.35 in Germany (see chart).

As the gap has widened between soaring international prices and fixed domestic prices, so has the cost of subsidies. Indeed, budgetary strains are now forcing some governments to lift prices. On May 24th Indonesia raised fuel prices by around 30%. This was the first increase since 2005, but it still leaves petrol too cheap at 65 cents a litre. Dearer oil is likely to push up inflation from 9% to 12%. But without the increase, the government’s subsidy bill was heading for an alarming 3% of GDP this year. In the past week Taiwan has also raised petrol prices by 13% and Sri Lanka has lifted them by 24%.

Malaysia has one of the biggest fuel-subsidy bills in the world, estimated at as much as 7% of GDP this year. By holding down the price of petrol, Malaysia now has the lowest inflation rate of all the 32 emerging economies tracked by The Economist. But the government is expected to allow prices to rise soon to curb its widening budget deficit.

In theory, rising crude-oil prices should reduce global demand. But if domestic prices are capped, then emerging economies will continue to guzzle oil, pushing world prices still higher. Emerging economies accounted for more than the whole increase in world oil consumption last year—because demand in the rich economies fell. But recent price increases will make little difference to global consumption unless China and India follow suit.

India’s state-owned oil companies face mounting losses, as they are forced to sell fuel at fixed prices below cost. Petrol prices are actually slightly higher in India than in the United States, because Indian motorists pay much higher fuel taxes, but diesel is about 40% cheaper than in America. The oil firms are partly compensated by bonds which the government issues to them—a trick which allows the government to keep the subsidy off its books. At today’s prices, the total subsidy (including the full losses of oil companies) could be as much as 2-3% of GDP this year. Morgan Stanley estimates that the government’s total budget deficit (central and state governments and all off-budget items) is running at 9% of GDP in this fiscal year. The government must hold an election by May next year, so it is reluctant to raise fuel prices by much. It is thought to be considering a modest rise combined with a cut in excise duty.

In early 2008 Chinese motorists paid roughly the same for their petrol as Americans did. Whereas the pump price in America has since jumped by 33%, Chinese prices have remained fixed, swelling the losses of state-owned refiners. According to Dragonomics, a Beijing-based economic research firm, the retail price for diesel is about 40% below that in America. To cut their losses, oil firms have reduced supply, causing shortages at some petrol stations. However, China is less likely than other countries to lift prices soon. Oil subsidies are estimated at less than 1% of GDP, and its budget surplus and small public debt mean that the government can afford to keep prices down for some time. Most likely, it will delay increasing fuel prices until food-price inflation has eased.

Across the emerging world, governments fear that lifting fuel prices will hurt the poor and so trigger social unrest. Yet fuel subsidies are an inefficient way to protect the poor: they mainly benefit the richer owners of cars and air-conditioners, and favour energy- and capital-intensive industries, rather than those that create most jobs. An IMF study of five emerging economies found that the richest 20% of households received, on average, 42% of total fuel subsidies; the bottom 20% received less than 10%. That money would be better spent on health, education and infrastructure. Not only would this benefit the poor, but higher prices would also help to dampen global oil consumption, and hence the price of oil.

Editor: In my opinion, we should compare our oil price against “Oil Producing Countries”, such as Saudi Arabia and Venezuela. If this is the logic you hold, you will agree that Malaysians are paying expensive oil. Our policy is bringing Malaysians to Inflation, and poverty!

Contributed by: The Economist