1. Home
  2. Insights
  3. Alerts
  4. October 2025

Bank Negara Malaysia issues New Policy Document on Personal Financing

07 October 2025

Bank Negara Malaysia (“BNM”) issued a new Policy Document on Personal Financing (“Policy Document”). The Policy Document came into effect upon its issuance on 30 September 2025, except paragraphs 10.3 to 10.13, 10.17 and 10.181 which will come into effect on 1 January 2027. The Policy Document supersedes a policy document by the same name issued on 15 December 2023.
 
Objectives
1. The Policy Document seeks to promote prudent and responsible financing practices with respect to the provision of personal financing by financial service providers, while encouraging responsible borrowing behaviour by financial consumers.
Application
2.
The Policy Document applies to:
  • licensed banks under the Financial Services Act 2013;
  • licensed Islamic banks under the Islamic Financial Services Act 2013; and
  • prescribed institutions under the Development Financial Institutions Act 2002 
(severally a “FSP” and collectively “FSPs”).
3.
A “personal financial product”, as defined in paragraph 6.2 of the Policy Document, means any of the following:
a) a financing product offered either directly by a FSP or jointly with another entity, or through the FSP’s intermediary, to individuals for personal, domestic or household purposes; and
b)
any buy now pay later (“BNPL”) arrangement, entered into by a financial consumer with a FSP, or in the case of a jointly provided product, with a FSP and the FSP's partner, for the purchase of goods or services where:
  • the FSP pays the seller for the purchase and credit is provided to the financial consumer; and
  • the payment due from the financial consumer to the FSP is deferred and may be made in a single payment or by instalments over an agreed period of time in accordance with the terms and conditions of the BNPL arrangement,​
but excludes any arrangement comprising moneylending as defined in the Moneylenders Act 1951 and credit sales transaction as defined in the Consumer Protection Act 1999.
4.
It is to be noted that:
  • paragraph 9 (submission requirements) and paragraph 10 (general requirements) of the Policy Document only apply to FSPs that offer a personal financing product as defined in paragraph 6.2(a) of the Policy Document; and
  • paragraph 11 (additional requirements relating to BNPL) of the Policy Document only apply to FSPs that offer BNPL financing as defined in paragraph 6.2(b) of the Policy Document.
5.
The Policy Document does not apply to the following financing products:
  • financing for the purchase of residential and non-residential property;
  • vehicle financing;
  • credit card and credit card-i, including an easy payment plan using the same credit limit;
  • charge card and charge card-i;
  • overdraft and revolving credit facilities with no fixed repayment or payment tenure;
  • micro-financing product or financing to a sole proprietor for purposes of its business;
  • financing for purchase of securities;
  • financing granted to employees of FSPs;
  • pawnbroking or Ar-Rahnu; and
  • financing for education purposes.
General Requirements
6. Some of the salient general requirements under paragraph 10 of the Policy Document are set out below.
Maximum Tenure
7. The tenure of a personal financing product shall not exceed 10 years. This time frame also applies to the restructuring or rescheduling of existing personal financing facilities which involve an increase in the amount of financing.
8. The requirement in paragraph 7 above does not apply to existing personal financing products which are restructured or rescheduled based on the specific circumstances of a financial consumer (e.g. distressed borrower), provided that the restructuring or rescheduling does not involve an increase in the amount of financing.
9.
A FSP shall treat the following types of financing offered under a home financing product for personal, domestic or household purposes, as a personal financing product:
  • additional financing amount in excess of an outstanding home financing amount being refinanced;
  • additional financing that, when combined with the outstanding balance of the financial consumer’s home financing, exceeds the original home financing amount; and
  • financing secured by an unencumbered property.
10.
The requirements in paragraph 9 above do not apply to the following :
  • additional financing taken under a home financing product to be used solely for renovation, mortgage reducing term assurance/takaful, legal fees, or for business purposes of a sole proprietor or for financing education;
  • additional financing under a home financing where (a) the financial consumer has paid down the home financing and the new financing amount and the outstanding balance does not exceed the original home financing amount and the tenure for the new financing does not exceed the remaining tenure of the original home financing tenure; or (b) the financing is up to the amount that has been pre-paid based on the financial consumer’s repayment schedule or where extra repayments were made by the financial consumer in advance. 
Reporting Requirements
11. The financing facilities in paragraph 9 above are to be given the reporting treatment set out in paragraphs 10.7 to 10.9 of the Policy Document.
12. A FSP shall report both conventional and Islamic BNPL in accordance with paragraph 11.24 of the Policy Document.
Prohibition of flat rate and/or the Rule of 78 method
13. The Policy Document prohibits a FSP from offering personal financing where the interest/ profit charge is based on a flat rate and/ or the Rule of 78 method2.
Prohibition on certain personal financing offerings
14.
The Policy Document prohibits a FSP from offering:
  • any form of pre-approved personal financing product, and requires personal financing to be granted only upon receiving a financial consumer’s verbal or written acceptance of the offer and the FSP is satisfied based on affordability assessment, that the financial consumer has the capacity to repay the personal financing; or
  • any personal financing product where the total or bulk of repayments, whether principal only or principal plus interest/ profit, is due only at the end of the financing tenure and is to be repaid from the financial consumer’s retirement funds (including EPF, pension and gratuity payment). 
Financial education
15. A FSP shall ensure that financial consumers attend and complete financial education module by the FSP or Agensi Kaunseling dan Pengurusan Kredit prior to applying for any new personal financing product where the financing amount exceeds RM100,000. A FSP may also encourage financial consumers who are assessed to be of higher risk3 to attend and complete a financial education module prior to applying for any new personal financing product.
Additional requirements on BNPL
 
Repayment capability
16. Prior to granting BNPL to a financial consumer, a FSP shall assess the financial consumer’s ability to make full repayment of the BNPL without resulting in the latter undergoing undue financial hardship.
Affordability assessment
17. For a financial consumer who has a cumulative BNPL credit limit4 of RM1,500 or above, a FSP must conduct an affordability assessment to ascertain the financial consumer’s ability to fully repay the new BNPL facility by observing a prudent debt service ratio as specified in the Policy Document on Responsible Financing.
18.
In carrying out the affordability assessment mentioned in paragraph 17 above, a FSP shall:
  • obtain and verify the financial consumer’s income; and
  • establish the financial consumer’s overall indebtedness by obtaining information on the financial consumer’s existing debt repayment obligations. 
Fees and charges
19.
In determining the late payment charge (“LPC”) and any other fees imposed on financial consumers, a FSP shall comply with the requirements under the following documents, as applicable:
  • Guidelines on Imposition of Fees and Charges on Financial Products and Services issued on 10 May 2012;
  • Operational Procedures for Submission of Application for the Imposition of Fees and Charges on Financial Products and Services issued on 23 January 2017; and
  • Guidelines on Late Payment Charges for Islamic Financial Institutions issued on 31 January 2013.
20. A FSP is required to obtain BNM’s approval prior to introducing any fees and charges on BNPL or increasing the current fees and charges on BNPL, including the LPC.
21. The LPC imposed must be an amount that only covers the actual costs incurred for recovering overdue instalments from financial consumers. A FSP is not permitted to set a minimum LPC.
22.
A FSP shall observe the following principles and requirements to ensure that the LPC imposed on financial consumers is fair and reasonable:
  • the quantum of LPC shall not be excessive (i.e. disproportionate when compared to the actual costs incurred for recovering overdue instalments);
  • the LPC shall exclude costs that are not relevant to the recovery of overdue instalments, such as the cost of funding, marketing and advertising, opportunity costs or any other operating costs not attributable to late payments by financial consumers; any unpaid LPC shall not be added to the outstanding amount (i.e. there must not be any compounding when computing LPC for the next repayment cycle); and
  • the FSP shall not consider LPC as an additional source of income for a BNPL facility.
23. A FSP shall clearly inform financial consumers at the point of offering BNPL to them, that LPC will be imposed if they fail to make payment by the due date. The FSP shall also provide a simple illustration on when the LPC will be imposed and the amount of the LPC.
24. A FSP shall send a reminder to financial consumers at least three calendar days before the payment due date. The reminder must clearly state the amount due and that a LPC will be imposed if the payment is missed, and include a simple illustration on when the LPC will be imposed as well as the amount of the LPC. The reminder must also clearly state that the BNPL account will be suspended after a specified number of missed payments.
25. A financial consumer’s BNPL account shall be suspended if he has missed three consecutive payments for a purchase. The suspension will be lifted when the missed payments have been fully settled. Subject to the terms and conditions of the BNPL agreement, a financial consumer’s BNPL account may be suspended even if the financial consumer has missed less than three payments for a purchase.
Shariah requirements on Islamic BNPL
26. For Islamic BNPL, a FSP is required to comply with the requirements set out in paragraph 11.20 of the Policy Document.
Merchant requirement
27. A FSP shall ensure that merchants do not set BNPL as the default payment option for financial consumers. A FSP may consider stipulating the restriction in its Service Legal Agreement (SLA) to ensure that the merchants fulfil their obligations.
 
Article by Lee Ai Hsian (Partner) and Javene Fan (Senior Associate) of the Banking and Finance Practice of Skrine.
 
 
 
1 Paragraphs 10.3 to 10.13 relate to maximum tenure of a product, reporting requirements and the prohibition of the flat rate and/or the “Rule of 78 method” of calculating interest/profit, and paragraphs 10.17 and 10.18 relate to financial education requirements.
2 The “Rule of 78 method” refers to an interest/profit calculation method by multiplying the total interest/profit payable over the loan/financing tenure by a fraction, the numerator of which is the number of periods remaining on such financing at the time the calculation is made, and the denominator of which is the sum of all the whole numbers from one to the number which is the total number of complete months in the period of the loan/financing agreement.
3 An example of a “higher risk” financial consumer is an individual who meets the vulnerable consumer definition under BNM’s policy document on Fair Treatment of Financial Consumers, in particular, a financial consumer who has an inadequate level of financial literacy or experience in using financial services or products.
4 This refers to the total credit limits on BNPL granted to a financial consumer by all BNPL providers, including the FSP. A FSP is allowed to set the cumulative BNPL credit limits at a lower amount.

This article/alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

  • Proud to be a member of
  • Lex_Mundi_3-line_Strap_White_RGB.png
  • connect with us
  •  
  •