MALAYSIA’S household debt remains within manageable levels despite recent concerns about loan approvals for middle-income earners, including civil servants, the Deputy Finance Minister Lim Hui y Yingof told Parliament on Wednesday.
Responding to a question from Kuala Krai MP Abdul Latiff Abdul Rahman, the ministry said total household debt stood at RM1.65 trillion as of March 2025, equivalent to 84.3 percent of GDP – a figure that shows little change from end-2024.
“The household debt situation must be viewed holistically, taking into account total household financial assets which stood at RM3.45 trillion in the same period. Overall, household financial assets still exceed debt by 2.1 times, providing a strong buffer,” the ministry said.
Loan approvals, including those for civil servants, are subject to Bank Negara Malaysia’s Policy Document on Responsible Financing, in effect since 2012. This policy aims to ensure that household borrowing remains aligned with repayment capacity.
“Financial institutions generally assess borrowers' ability to repay by considering minimum net disposable income and applying limits through the Debt Service Ratio (DSR),” the ministry noted. At the end of 2024, the median DSR for household loans stood at a prudent 34 percent.
Specific controls also apply to the public sector. Under Regulation 13 of the Public Officers (Conduct and Discipline) Regulations 1993, civil servants must not fall into serious financial indebtedness and are required to retain a minimum of 40 percent of their monthly salary as net pay.
Data from the Department of Insolvency revealed that 4,194 bankruptcy cases involving civil servants were recorded between 2020 and June 2025, accounting for just 0.3 percent of the 1.6 million public sector workforce.
The government continues to support financial resilience through the Credit Counselling and Debt Management Agency (AKPK) under BNM, which offers advisory services and loan restructuring options. Additionally, the Public Service Department (JPA) conducts personal financial literacy training for new officers under its Mind Transformation Programme (PTM). - August 13, 2025
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