Banking (Finance Companies)

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Total resources of finance companies declined during the first seven months of 1998. Total resources (mainly comprising capital and reserves, deposits and borrowings from other financial institutions) mobilised by finance companies declined by 11.9% to RM134.305.2 million at end-July 1998, compared with an increase of 17.9% to RM141, 233.4 million during the corresponding period of 1997. The decline in total resources was mainly due to lower deposits and borrowing from other financial institutions. Total deposits of the finance companies declined by 1.8% to RM4, 567.3 million as at end-July 1998, compared with an increase of 17.1% in the corresponding period of 1997, reflecting primarily lower disposable incomes and slowdown in economic activities. The lending operations of finance companies also contracted during the first seven months of 1998, in consonance with the decline in resources. Total loans extended to the various sectors of the economy declined by 10% to RM92, 320.8 million at the end of July 1998 compared with a positive growth of 18.2% during corresponding period of 1997.

New deposits mobilised by finance companies declined by RM1, 944.4 million during the first seven months of 1998, compared with an increase of RM15, 500.1 million during the corresponding period of 1997. The major depositors were 'individuals' (48.4%), financial institutions (13.7%), business enterprises (11.2%) and the Government and statutory authorities (8.3%). In terms of kind of new deposits mobilised, only fixed deposits and IBS deposits registered increases during the period. Savings deposits, NIDs issued repos and others all registered declines during the period. Fixed deposits increased by 8.0% from the end of 1997 to RM80, 802.5 million at end-July 1998, due largely to the relatively higher interest rates offered for such deposits. Savings deposits declined by 17.0% or RM522.8 million during the first seven months of 1998, compared with a decrease of 6.8% during the corresponding period of 1997. NIDs issued by the finance companies decreased significantly by 22.4% during the seven months of 1998, compared with an increase of 3.1% during the same period of 1997. As at end July 1998, total outstanding deposits of finance companies amounted to RM104, 567.3 million, representing 16.9% of total resources of the banking system. As a percentage of total outstanding deposits, 78.1% was in the form of fixed deposits, while NIDs and savings deposits represented 13.8% and 2.9% respectively of the total outstanding deposits at the end of July 1998.