KUCHING: The Sarawak Bank Employees’ Union has criticised the government’s proposal to allow Employees Provident Fund (EPF) contributors to use their Account 2 savings as collateral for personal bank loans.
Describing the government’s proposal as absurd, the union’s chief executive officer Andrew Lo said contributors’ savings were safeguarded from bankruptcy proceedings under the EPF Act.
“So, what happens if the borrowers default on their loans? Would banks agree to give loans on such collateral.
Secondly, banks are going to charge a higher interest rate than EPF dividends, so contributors will see their overall financial position worsen further,” he said in a statement.
Lo said the proposal would likely increase the already alarming level of indebtedness among Malaysians.
In stating this, he said many workers were already spending a significant portion of their income to repay housing, vehicle and consumer loans.
In view of this, the EPF said it is assessing the implementation of the government’s proposed scheme to allow contributors to use their Account 2 savings as collateral for personal bank loans.
EPF also said it will consider all the relevant factors involved in this initiative so it would be implemented smoothly.
“EPF acknowledges the recent announcement by Prime Minister and Minister of Finance Datuk Seri Anwar Ibrahim regarding the use of the balance of contributions in Account 2 to support the application for a personal bank loan for those who need cash assistance.
“Further details regarding the implementation of this initiative will be announced at a later date,” it said in a statement.
Earlier, Anwar in his Budget 2023 winding up speech said the proposed scheme would only be for those in desperate need of funds and were forced to apply for bank loans.
He reiterated that he did not agree with allowing another round of special EPF withdrawals.
