# Borrowing in Foreign Currency: What a Malaysian Company May Do

> Under Notice 2 of Bank Negara's FEP Notices, foreign currency borrowing from your own group or direct shareholder is unlimited, while borrowing from unrelated non-residents is capped at RM100 million equivalent across the group.

- Category: business
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/business/foreign-currency-borrowing-malaysia

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A foreign parent wants to fund its Malaysian subsidiary with a USD shareholder loan
instead of equity. Someone raises Bank Negara, and the deal stalls for a month while
everyone hunts for an approval that is not required. Part B of **Notice 2** of the Foreign
Exchange Policy Notices — in operation since 1 October 2025 — already approves it, without
limit.

## The rule, in one table

| Lender | Foreign currency limit |
| --- | --- |
| A licensed onshore bank | Any amount |
| An entity within the borrower's Group | Any amount |
| The borrower's Direct Shareholder | Any amount |
| Another Resident, via issuance of FC bonds or sukuk | Any amount |
| A non-resident **outside** the Group | **RM100 million equivalent in aggregate** |
| A non-resident financial institution | **RM100 million equivalent in aggregate** |
| A non-resident SPV raising funds outside the Group | **RM100 million equivalent in aggregate** |

Two definitions do the work. **Direct Shareholder** means a shareholder with **at least
10% effective shareholding**: a 10% holder can lend without limit, a 9% holder is capped.
**Group** is broader than most assume — it covers the ultimate or direct holding entity,
head office, branches, subsidiaries owned more than 50%, **associate companies owned
between 10% and 50%**, and **sister companies sharing a common shareholder with at least
10% in both**.

## The cap is a group number

Paragraph 10 computes the RM100 million equivalent **based on the aggregate borrowing in
foreign currency by the resident entity and other resident entities with a
parent-subsidiary relationship**. Bank Negara's FAQ restates this as an aggregate on a
corporate group basis.

So a Malaysian group with four operating companies does not have four caps. It has one.
This is the most common error in the market, and it surfaces late — when the fourth
facility is being drawn and the headroom is already gone.

The asymmetry is deliberate: Bank Negara is managing **aggregate external foreign currency
exposure**, and money lent by your own parent is capital in a different legal form, not
third-party leverage. So **if your funding comes from your own shareholders or group, the
FEP is not your constraint** — transfer pricing on the interest rate is.

Paragraph 11 allows refinancing of borrowing approved under paragraphs 6 to 10, subject to
the requirements of the paragraph it was originally approved under. Refinancing does not
reset the category.

## Ringgit borrowing is much tighter

Read only the foreign currency rule and you get an over-optimistic picture. Under
paragraphs 6 and 8, a resident entity may borrow ringgit from a non-resident:

- **in any amount** to finance a **Real Sector Activity in Malaysia** from a non-resident
  within its Group, including a non-resident direct shareholder — but **excluding** a
  non-resident financial institution and excluding a non-resident SPV used to raise money
  from outside the Group;
- **in any amount** from a Multilateral Development Bank or a Qualified Development
  Financial Institution; and
- otherwise, **up to RM1 million in aggregate**, again on a parent-subsidiary group basis.

Real Sector Activity means construction or purchase of residential or commercial property,
or production or consumption of goods or services — expressly **excluding** financial
services activity and the purchase of securities or financial instruments. An investment
holding company borrowing ringgit from its foreign parent to buy shares is outside the
unlimited limb.

## What is not Borrowing at all

The Interpretation excludes several things from the definition of Borrowing, removing them
from these limits entirely: a **trade credit term** extended by a supplier for goods or
services, a financial or non-financial guarantee, an **operational leasing** facility, a
**factoring facility without recourse**, and specified individual credit card and
residential or vehicle facilities.

Ordinary supplier payment terms from a foreign vendor are therefore not borrowing, however
long they run. Conversely, a redeemable preference share **is** Borrowing under limb (c) —
which surprises people who structured the instrument as equity to avoid this analysis.

## Common mistakes

**Applying the RM100 million cap per company.** It is aggregated across resident entities
in a parent-subsidiary relationship.

**Assuming a minority foreign shareholder can lend freely.** Below 10% effective
shareholding they are not a Direct Shareholder, and unless they sit inside the Group the
capped limb applies.

**Forgetting the non-resident financial institution carve-out.** A loan from an offshore
bank that is not a licensed onshore bank is capped even where that bank is affiliated with
your group.

**Treating redeemable preference shares as outside the rules.** They are within the
definition of Borrowing.

## What's next

Establish the aggregate first: list every Malaysian entity in a parent-subsidiary
relationship with the borrower and total the existing foreign currency borrowing from
outside the group. That number, not the size of the new facility, tells you whether you
have headroom.

Then classify the lender against the Group and Direct Shareholder definitions before you
document the facility. Where a facility would exceed the aggregate, the route is a written
approval from Bank Negara through the FEP Public Portal at `fep.bnm.gov.my`, before
drawdown.

## Sources

- Notice 2 — Borrowing, Lending and Guarantee — https://www.bnm.gov.my/documents/20124/60360/Notice+2_Borrowing%2C+Lending+and+Guarantee_2+Oct+2025.pdf (Bank Negara Malaysia)
- Foreign Exchange Policy Notices (Consolidated), in operation 1 October 2025 — https://www.bnm.gov.my/documents/20124/60360/Consolidated+Foreign+Exchange+Policy+Notices_2+Oct+2025_Update.pdf (Bank Negara Malaysia)
- FAQs on Borrowing by Resident — https://www.bnm.gov.my/documents/20124/60360/FAQs_Resident+Ringgit+and+FC+Borrowing.pdf (Bank Negara Malaysia)

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