Since the 1970s, the government had imposed various regulations to give an edge to local lenders. But this is expected to change when the banking sector is liberalised in 2007 under the Financial Sector Masterplan, leading to the removal of restrictions on foreign banks.
Nelson said StanChart Malaysia would move strongly into the lending to small- and medium-scale enterprises (SMEs) now that Bank Negara had introduced an overnight policy rate to allow banks to set their base lending rates based on their own cost structure and business strategies.
“One of the issues back then was that the interest rate was capped at 2.5 percentage points over the base lending rate. That’s the maximum we could charge and if you look at the risk-reward equation involved, it does not make commercial sense.
“With the central bank lifting the cap, I think it will be a stimulus for SME lending,” he said.
