Bank Negara Malaysia ('BNM') issued the Policy Document on Reference Rate Framework ('Policy Document') on 11 August 2021.

The Policy Document will apply to licensed banks, licensed Islamic banks and prescribed development financial institutions, and will come into effect on 1 August 2022 in place of the policy document on Reference Rate Framework issued by BNM on 18 August 2016.

In essence, the Base Rate under the existing Reference Rate Framework will be replaced by a Standardised Base Rate ('SBR'), which is based solely on the Overnight Policy Rate ('OPR'), as determined from time to time by the Monetary Policy Committee of BNM. Changes to the SBR will only occur when there is a change to the OPR. Other components of loan pricing such as the borrower's credit risk, liquidity risk premium, operating costs, profit margin and other costs will continue to be reflected in the spread above the SBR.

The SBR will be the common reference rate for pricing of all new retail loans or new retail Shariah-compliant financing facilities (including, but not limited to, housing loans/financing, vehicle loans/financing and personal loans/financing) as from 1 August 2022. The SBR framework will generally not apply to fixed rate hire purchase loans, loans to SMEs and corporate loans.

The basis for determining interest rates on existing loans as of 1 August 2022 will not be affected by the introduction of the SBR.

More information is available at the links provided below.

BNM's media release:

Policy Document:

Consumer Guide and FAQs

Originally Published 12 August 2021

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