RM32 million bank loan to VIP interest free!

Former Bank Rakyat chairman Tan Sri Sabbaruddin Chik today rebutted the bank’s denial that it had agreed to a financing repayment on a RM32 million loan to a VIP without any interest.

He reiterated that the bank’s board of directors had initially rejected the easy repayment option proposed by the VIP, said to be involved in carpet trading, but had to give in due to the interference of a minister in the matter.

"I just want to clarify that the one who rejected the suggestion was not me, the entire board rejected it," Sabbaruddin told The Malaysian Insider.

The Malaysian Insider yesterday reported that the VIP had used political connections to settle a loan amounting to RM32 million without any interest due to the intervention of Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hasan Malek.

The board of directors had initially rejected the compromise offered by the individual to settle his outstanding debt.

Following Sabbaruddin's allegations, Bank Rakyat in a statement yesterday said that the element of interest did not arise in the Islamic financing mechanism.

"Each financing is a sales and purchase agreement which includes elements of profit and administrative costs such as late payment charges.

"As far as the bank is concerned there is no repayment and financing that is without profit and administrative charges," the bank said.

The bank, however, did not refute Sabbaruddin's allegations.

Sabbaruddin explained today that the board of directors had met to discuss the unpaid debt by the VIP and in the meeting, the board members unanimously voted against the easy exit proposed by the individual.

"Bank Rakyat must explain what method was used where the borrower would end up paying the same amount he borrowed," he said.

According to Sabbaruddin, the individual had offered 120 post-dated cheques to be cashed in by the bank over a 10-year period.

"Ten years to pay off a debt without interest, that means the bank will be the big loser in the end," Sabbaruddin said previously.

According to him, after the decision was made, Hasan was dissatisfied and refused to sign the letter extending his tenure as Bank Rakyat chairman.

"My term ended on April 8 and Bank Negara had agreed to extend my contract, but Hasan refused to sign it," Sabbaruddin said.

Sabbaruddin had also showed The Malaysian Insider a letter signed by Hasan instructing Bank Rakyat to proceed according to the terms of the compromise.

The debtor is believed to be the owner of a carpet firm in the capital who had sparked controversy in the past.

Msian Insider