Malaysian Banks Lower Lending and Interest Rates

In response to Bank Negara Malaysia’s (BNM) recent decision to lower the Overnight Policy Rate (OPR) by 25 basis points—from 3.00% to 2.75%—several leading Malaysian banks have announced revisions to their lending and deposit rates. This move is expected to stimulate economic growth, ease borrowing costs, and provide financial relief to households and businesses amid rising living expenses and global economic uncertainties.

Bank Islam Malaysia Leads Rate Adjustments

Bank Islam Malaysia Bhd was among the first to announce changes, reducing its Standardised Base Rate (SBR), Base Rate (BR), and Base Financing Rate (BFR) by 25 basis points each, effective 10 July 2025. The new rates stand at 2.75%, 3.52%, and 6.47% per annum, respectively.

Datuk Mohd Muazzam Mohamed, Group Chief Executive Officer of Bank Islam, stated that the adjustment aligns with the bank’s commitment to supporting economic activity and easing financial burdens for customers with financing linked to these rates. He emphasized that the lower OPR will allow the bank to expand its financing portfolios while maintaining strong asset quality. Additionally, he noted that the reduction presents an opportunity to enhance financial resilience, particularly for those most affected by inflation.

RHB Banking Group Follows Suit

Similarly, RHB Banking Group adjusted its SBR, BR, and BFR to 2.75%, 3.50%, and 6.45% per annum, respectively, also effective 10 July. The bank also announced a corresponding reduction in fixed deposit rates by 25 basis points.

Datuk Mohd Rashid Mohamad, RHB’s Group Managing Director and Chief Executive, explained that the move supports BNM’s efforts to stimulate domestic demand through lower borrowing costs. He highlighted that the adjustment would particularly benefit small and medium enterprises (SMEs) and households, helping them manage expenses and encouraging spending amid global economic challenges.

Public Bank and Affin Bank Group Announce Revisions

Public Bank Bhd joined the trend, reducing its SBR to 2.75% (in line with the OPR), BR to 3.27%, and BFR to 6.47%, effective 11 July. The bank’s fixed deposit rates will also see a downward adjustment. Tan Sri Tay Ah Lek, Public Bank’s Managing Director and Chief Executive, emphasized that the changes would improve affordability for borrowers.

Meanwhile, the Affin Bank Group—comprising Affin Bank Bhd, Affin Islamic Bank Bhd, and Affin Hwang Investment Bank—announced a 25-basis-point reduction in its loan and financing reference rates, effective 11 July. The group’s SBR, BR, and BFR will be adjusted to 2.75%, 3.70%, and 6.56%, respectively. Fixed and term deposit rates will also be lowered accordingly.

Alliance Bank Adjusts Rates with a Slight Delay

Alliance Bank Malaysia Bhd and Alliance Islamic Bank Bhd confirmed similar adjustments, though their changes will take effect slightly later, on 15 July. The banks’ SBR will drop to 2.75%, while the BR and BFR will be revised to 3.57% and 6.42%, respectively. Fixed deposit rates will also be adjusted downward on the same date.

Economic Implications of the OPR Reduction

BNM’s decision to cut the OPR by 25 basis points is part of a broader strategy to support economic growth amid slowing global demand. Lower interest rates reduce borrowing costs for businesses and consumers, encouraging spending and investment. This is particularly crucial for SMEs and individuals facing financial strain due to rising costs of living.

The banking sector’s swift response to the OPR adjustment demonstrates its role in facilitating monetary policy transmission. By lowering lending rates, banks aim to stimulate credit demand, which can drive economic activity. However, the reduction in deposit rates may also impact savers, prompting them to seek alternative investment avenues for better returns.

The latest round of rate revisions by major Malaysian banks reflects a coordinated effort to align with BNM’s accommodative monetary policy stance. As borrowing becomes more affordable, businesses and consumers may find it easier to manage finances, potentially boosting economic momentum in the coming months. However, the full impact of these changes will depend on broader economic conditions, including inflation trends and global market stability.