KUALA LUMPUR (Sept 30): Consumers applying for personal loans exceeding RM100,000 must attend a financial education module under a new policy that will come into force in 2027.

To assist prudent and smart financial decisions, borrowers must complete the education session held by the lenders or Agensi Kaunseling dan Pengurusan Kredit, Bank Negara Malaysia (BNM) said in a policy document on personal financing released on Tuesday.

A lender “may also encourage consumers who are assessed to be of higher risk to attend and complete a financial education module prior to applying for any new personal financing product,” BNM said.

The policy document, among others, also introduces measures to reinforce expectations for lenders to disclose the effective interest rate to consumers as part of an aim to promote prudent and responsible financing practices.

The requirements come at a time of intense competition in the market targeting individual borrowers in the country of 32 million people and home to more than three dozen local and foreign banks.

The central bank said it is observing changes in the “lending practices of credit providers in the personal financing segment which are contributing to unaffordable borrowing by households.”

In particular, BNM flagged the emergence of “new financing products that give the appearance of affordable borrowing but actually encourage the imprudent accumulation of debt that financial consumers cannot really afford without significant risk of hardship over the duration of the financing facility due to inadequate financial buffers.”

The new measures will apply to all licensed banks and Islamic banks as well as development financial institutions.

While lenders are already required to conduct suitability and affordability assessments, “more specific requirements are necessary to prevent unhealthy developments in the personal financing segment”, the central bank stressed.