A Malaysian-incorporated company may borrow foreign currency in any amount from a licensed onshore bank, from an entity within its own group, or from its direct shareholder. From anyone else outside the group — including any non-resident financial institution — the ceiling is RM100 million equivalent in aggregate, computed across the company and every resident entity in a parent-subsidiary relationship with it. The rules sit in Part B of Notice 2 of the Foreign Exchange Policy Notices.
- Notice 2 came into operation on 1 October 2025 as part of the reissued FEP Notices
- Foreign currency borrowing from a licensed onshore bank, from within the group, or from a direct shareholder is unlimited
- A direct shareholder means a shareholder with at least 10% effective shareholding
- Borrowing foreign currency from unrelated non-residents, from a non-resident financial institution, or through a non-resident SPV raising money outside the group is capped at RM100 million equivalent in aggregate
- The cap is a group figure, not a company figure — it aggregates resident entities in a parent-subsidiary relationship
- Ringgit borrowing from a non-resident is far tighter: unlimited only from within the group for a Real Sector Activity, otherwise RM1 million in aggregate
- Supplier trade credit, operational leases and non-recourse factoring are excluded from the definition of Borrowing entirely
Who this applies to: Malaysian companies raising offshore debt, receiving shareholder loans from a foreign parent, or planning intra-group treasury funding.
On this page
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.
The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:
- Bank Negara publishes a separate FAQ on resident ringgit and foreign currency borrowing which elaborates on the group test and on permitted source and receipt accounts — check the current FAQ before structuring a facility
- Where a proposed facility exceeds the RM100 million equivalent limit, the written approval process and its assessment criteria are not published in full; the FAQ notes only that BNM will take stated factors into account
Sources
- Notice 2 — Borrowing, Lending and Guarantee — Bank Negara Malaysia
- Foreign Exchange Policy Notices (Consolidated), in operation 1 October 2025 — Bank Negara Malaysia
- FAQs on Borrowing by Resident — Bank Negara Malaysia
Change history
| Version | Date | Change | By |
|---|---|---|---|
| 01.00 | 20 Jul 2026 | Approved and published. | — |