The current economic slow down has resulted in banks becoming more cautious in their lending say analysts.

Local banks with high exposure to car loans are looking to re-price hire purchase rates. There is also expectation of a drop in car sales volumedue to the recent fuel hike.

THE EDGE reported Jul 14, 2008 that banks are also more stringent in providing loans for shares trading in initial public offering's (IPOs) for employees.

AMRESEARCH FIONA LEONG was quoted saying that " .... We are not surprised that banking groups are taking cautious steps in their lending activities, as these financial institutions cannot afford to have high amount of bad loans at this point of time ....". She said it showed that financial institutions were more geared towards keeping their write-off provisions and writedowns in non-performing loans low at the moment, than to take cover from an anticipated rise in interest rates by Bank Negara Malaysia.

LEONG, however, added that banking groups had yet to make a move to raise lending rates, but added that these institutions might tweak their base lending rates (BLR), should interest rates go up.

CITI INVESTMENT forecast that local banking groups might eventually raise the hire purchase rates of non-national cars to 6% from 4.5%, which would be in line with national cars