BNM Tightens Rule On Personal Financing And BNPL, Bans Flat Rate Loans
Bank Negara today released a policy document on stricter regulations for personal financing products, including Buy Now Pay Later (BNPL) schemes, in efforts to promote responsible lending and curb unhealthy household debt accumulation.
The new Personal Financing Policy Document, effective immediately, sets a maximum loan tenure of 10 years for personal financing facilities. It also prohibits the use of flat-rate and Rule of 78 interest calculation methods, which have long been criticised for burdening borrowers with higher overall repayment costs.
BNM highlighted that intense competition in retail credit has led to the emergence of products that appear affordable but risk encouraging excessive debt. “More specific requirements are necessary to prevent unhealthy developments in the personal financing segment,” the central bank said.
Among the key measures:
- No pre-approved loans – Financial institutions can no longer offer pre-approved personal financing. Borrowers must undergo affordability assessments before any facility is granted.
- Financial education requirement – Consumers applying for loans exceeding RM100,000 must complete a financial education module conducted by the lender or Agensi Kaunseling dan Pengurusan Kredit (AKPK).
- BNPL oversight – Lenders offering BNPL must assess borrowers’ repayment capacity, factoring in credit history or utility bill payments. BNPL will also be reported in the Central Credit Reference Information System (CCRIS) to improve transparency.
- Ban on retirement-fund repayments – Loans structured to be repaid primarily from EPF savings, pensions, or gratuities at retirement are disallowed.
BNM also mandated that late payment charges (LPC) under BNPL must reflect only actual recovery costs, with clear disclosures and reminders to consumers before due dates. Islamic BNPL facilities must comply with Shariah principles, with additional safeguards against financing non-compliant goods and services.
The policy complements BNM’s Responsible Financing Policy Document, also issued on 30 September 2025, as part of efforts to strengthen household financial resilience and ensure sustainable credit growth.
The new requirements on reporting and disclosures take effect immediately, while certain provisions – such as detailed disclosure rules and financial education modules – will be enforced from 1 January 2027.
