The Sarawak Bank Employees’ Union said the government’s proposal was “ill-conceived”, pointing out that contributors’ savings were safeguarded from bankruptcy proceedings under the EPF Act.

“So what happens if the borrowers default on their loans? Would banks agree to give loans on such collateral?” the union’s CEO, Andrew Lo, said in a statement.

“Secondly, banks are going to charge a higher interest rate than EPF dividends, so contributors will see their overall financial position worsen further.”

Lo said the proposal would lead to an increase in the already “alarming” level of indebtedness among Malaysians.

He said many workers were already spending a significant portion of their income to repay housing, vehicle and consumer loans.

In his Budget 2023 winding-up speech yesterday, Prime Minister and finance minister Anwar Ibrahim said the proposed scheme would only be for those in desperate need of funds and were forced to apply for bank loans.

Anwar reiterated that he did not agree with allowing another round of special EPF withdrawal.

In response, EPF said it was assessing the proposed scheme and will consider all the relevant factors involved for it to be implemented smoothly.