The Foreign Exchange Administration Policies have been liberalised to achieve the following strategic objectives:

  • Malaysia as an Islamic Financial Centre
  • Financial Sector Masterplan
  • Capital Market Masterplan

Effective 1 April 2007, the foreign exchange administration rules have been liberalised to facilitate development of the financial and capital markets. The table below summarises foreign exchange administration policies prior to 1 April 2007 and now, with regards to resident and non-resident individuals.

Policies Prior to 1 April 2007 With Effect from 1 April 2007
1. Limit imposed on a licensed onshore bank for foreign currency accounts maintained by residents A licensed onshore bank was granted specific aggregate overnight limit for foreign currency accounts maintained by residents The overnight limit of licensed onshore banks for foreign currency accounts maintained by residents is abolished
2. Investment in foreign currency assets by a resident individual, corporation and an institutional investor Resident individual with domestic Ringgit borrowing Up to MYR100,000 equivalent in aggregate per calendar year Resident individual with domestic ringgit borrowing Up to MYR1 million equivalent in aggregate per calendar year
3. Joint foreign currency accounts between resident individuals Joint foreign currency accounts between resident individuals were only allowed for overseas education and employment purposes. For other purposes, prior approval must be obtained from the Controller Joint foreign currency accounts between resident individuals are allowed for any purpose
4. Hedging of foreign currency loans repayments by a resident A resident was allowed to hedge foreign currency loan repayments only up to 24 months' commitment A resident is allowed to hedge foreign currency loan repayments up to full commitment of the loans
5. Payments in foreign currency between residents Payments in foreign currency between residents require prior permission of the Controller of Foreign Exchange Payments in foreign currency between residents are allowed for settlement of foreign currency financial products offered onshore
6. Ringgit property loans obtained by a non-resident from residents to finance the purchase or construction of residential and commercial properties in Malaysia A non-resident was allowed to obtain only up to 3 credit facilities from residents to finance the purchase or construction of residential or commercial properties in Malaysia A non-resident is free to obtain any number of credit facilities from residents to finance the purchase or construction of residential properties in Malaysia
How does the liberalisation benefit me based on the policies illustrated above?

For policy no.1, prior to 1 April 2007, licensed onshore banks like Standard Chartered were granted specific aggregate overnight limit for foreign currency accounts maintained by resident customers.

With the liberalisation, the overnight limit of licensed onshore banks for foreign currency accounts maintained by resident customers is abolished.

For policy no.2, before the liberalisation, resident customers with domestic borrowings who wanted to invest in foreign currency assets were only allowed to convert up to a maximum of MYR100,000 in aggregate per calendar year for such investment. If purpose of opening the foreign currency account was for education, the cap was at USD150,000, regardless of resident customers with/without domestic borrowings.

With the liberalisation, resident customers with domestic borrowings now have the opportunity to invest more in foreign currency assets as the previous limit of MYR 100,000 has been increased to MYR 1 million in aggregate per calendar year. The cap of USD 150,000 for education purpose remains for resident customers with domestic borrowings.

Further, resident customers are now allowed to open and maintain joint foreign currency accounts for any purpose.

As for policy no. 3, previously, joint accounts between residents were only allowed if it was meant for either education / employment abroad. Joint accounts for any other reasons were not permitted, except with the prior approval from the Controller. Following the liberalisation, joint accounts between resident customers can now be opened for any purpose without having to obtain prior approval from the Controller.

Policy no. 4 states that a resident customer was allowed to hedge foreign currency loan repayments only up to 24 months' commitment. However, with the liberalisation resident customers can hedge the foreign currency loan repayment up to the full commitment of the loans.

In policy no. 5, a resident customer who wanted to make foreign currency payments to another resident customer was first required to obtain prior permission of the Controller. With the liberalisation, payments in foreign currency between residents is allowed for settlement of foreign currency products offered onshore, without the need to obtain prior approval of the Controller.

For policy no. 6, a non-resident customer was allowed only up to a maximum of 3 credit facilities from residents to finance the purchase / construction of residential / commercial properties in Malaysia. With the liberalisation, non-resident customers are now free to obtain any number of credit facilities from residents to finance the purchase / construction of residential / commercial properties in Malaysia.

What is domestic borrowing?

Domestic borrowing refers to any loan, trade financing, hire purchase, factoring, leasing, redeemable preference shares or other similar facility in whatever name or form, but excludes:

  • Trade credit terms extended by a supplier for all types of goods & services
  • Forward exchange contracts entered with authorised dealers
  • One personal housing loan and one vehicle loan
  • Credit card and charge card facilities

To view more policies, please log on to Bank Negara Malaysia's website at http://www.bnm.gov.my.

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