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Ex-second finance minister reiterates warning on using EPF as collateral for bank loans

KUALA LUMPUR: Former second finance minister Datuk Seri Johari Abdul Ghani hopes that the government will review his suggestion to let people withdraw from the Employees’ Provident Fund (EPF) rather than using it as collateral to support a loan application.

Previously, the Titiwangsa member of parliament warned against using EPF savings to support a loan application.

He said it would be simpler to allow people to withdraw their savings from the retirement fund, adding that, however, the withdrawals should only be permitted for emergencies such as health or education expenses.

“There are simpler mechanisms for this (withdrawal). But if there are no valid reasons, everyone would want to withdraw.

“This is what happened during two years of facing Covid-19 when RM145 billion EPF savings was withdrawn including by those who didn’t need to do so, but still did.

“This could affect the future of people who have been saving up. So I hope they will look into my suggestions,” he said after the Ramadan Madani: Titipan Kasih programme at Masjid Jamek, Kampung Baru, here.

Johari said there were various aspects to look into if people were to place their EPF savings as collateral.

“For example, we need to consider the law and the interest fee before using the savings as collateral.”

In early March, the government announced that it will allow a special collateral agreement to assist Employees Provident Fund (EPF) contributors through bank loans.

Prime Minister Datuk Seri Anwar Ibrahim said the collateral agreement was more suited to assist contributors who were in “desperate” need without having to withdraw their savings.

Phase 1, which began on April 7, 2023, will remain open for one year. Eligible members who are 40 or older may apply, subject to the readiness of the participating banks.

Source : NST

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