Okay, I have always have this thought that banks love to lend and that the borrowers just have to qualify for it when they are applying for one. There are many who continue to argue that banks are no longer lending. In fact banks are now rejecting most applicants. Whatever thoughts one may have matters little. Banks will have more money to lend but it does seem that the number of borrowers are just not enough. In other words, demand for these newly available funds are lacking.
Article in theedgemarkets.com here. Bank Negara Malaysia’s (BNM) move to reduce the statutory reserve requirement (SRR) ratio to 3% from 3.5% meant that the banks will have more money in hand to lend out. This 0.5% cut in SRR is expected to release RM7.35 billion into the banking system.
RHB Research analyst Fiona Leong opines that the SRR cut may not be able to improve loan growth significantly. She said, “A cut means the liquidity will be released back to the banking system. But if you looked at the system’s loan growth, the problem is not so much on the liquidity within the system that contributes to the soft loan growth. The (loan) growth has been soft because the demand is weak. Even BNM cuts the SRR to put money into the (banking) system, it is not going to help much.” There are many more comments from other bank analysts but generally the views are the same. Read it in Article in theedgemarkets.com here.
Briefly, when the economy slows down, even the demand for loans from the business sector will be reducing. Businesses do not see the need to expand if they do not expect their business to pick up. Meanwhile, consumers, especially the first timers may still be uncertain and many continue to be thinking that it’s best to wait for the best time to buy. This is despite the fact that not many understand that the best time was during a financial crisis.
When it (financial crisis) really do come, I wonder how many are courageously entering the market when they did not dare to enter the market at a time when the sellers have a weaker bargaining power. Anyway, it’s good to know that the banks will have more liquidity and this definitely gives them extra flexibility in deciding if they wish to increase their lending or perhaps assume a slightly higher risk too. Happy investing.
Please LIKE kopiandproperty.com FB page or Sign Up for free to get daily updates about the property market. Else, follow me on Twitter here.
Photo by ‘Robert Owen-Wahl’ from FreeImages
Next suggested article: When the property market crashes
