Public Bank, Standard Chattered and Hong Leong bank have raised their interest rates by 10 basis points recently. Public Bank raise their base rate to 3.75% and BLR to 6.95% which took effect on 17th May. Hong Leong raise their base rate to 3.94% while BLR to 6.95% took effect on 25th April. Standard Chartered followed the suit and raise their base rate to 3.77% while BLR to 6.95% took effect on March 18. The SRR was reduced by 50 basis points to 3.5% early this year. Kuala Lumpur Interbank Offered Rate (3MKLIBOR) has also been trending down due to reduced SRR by Bank Negara Malaysia.
With this move, these banks are able to repriced their existing loans to a higher rates. Which means that borrowers will have to eventually pay higher installment while they still have loans with these banks. This will effect all loans where interest is calculated by BR or BLR. According to Maybank IB , the move reflect cost funding pressure that are faced by banks with fierce competition for deposit and tight liquidity. This is reflected by attractive rates of fixed deposit promotions offered by banks in Malaysia lately. Despite the move, there are also possibilities that Bank Negara may reduce the OPR by a total of 25 basis points by the year end. Banks may have to readjust their interest rates if this happens. Maybank currently has the lowest BR which stood at 3.2% and BLR which stood at 6.85% will have much space to adjust their rates.
Recently, Bank Negara announced that OPR will remain unchaged at 3.25%. The announcement was made on 20th May 2016. According to BNM, the domestic financial conditions remains stable while the current OPR rate is accommodating and supportive of current economic activity. Inflation rate is averaged at 3.4% on the first quater of this year while it is expected to decrease due to cheaper commodities and energy prices.