Six banks vow to complete shift to reducing-balance hire-purchase calculations by year-end

At the Consumers Festival 2026 held at Stadium Batu Kawan, Minister Armizan Mohd Ali announced that six banks have committed to complete their conversion from the old flat-rate and Rule of 78 calculation methods to the reducing-balance approach by Dec 31. He added that 80% of the 429 hire-purchase providers listed with the Association of Hire Purchase Companies Malaysia are already applying the reducing-balance method and the effective interest rate.

The remaining 20% must finish the transition by the grace period ending on March 31, 2027, as mandated by the amended Hire-Purchase Act. The legislation removes the Rule of 78, which previously allocated more interest to early instalments, and abolishes flat-rate interest structures, ensuring interest is calculated on the outstanding principal.