Malaysian Prime Minister Najib Razak has condemned the organisers of demonstrations in Kuala Lumpur calling for his resignation as "haram", during his annual address on the eve of Independence Day.

Tens of thousands of protesters have called for Najib to stand down, after leaked documents in July showed he received about $700m in his private accounts from entities linked to an indebted state fund.

Najib said the protests mirrored "the shallowness of patriotism" and reminded protesters that the mufti of the state of Kelantan had called the protest organisers - the electoral reform pressure group Bersih - "haram".

"Before I make a further statement, I appeal to all, especially those here, either sitting here or standing, that without wasting time, let's focus our attention to silence and ponder and close our eyes," Najib said.

"The fact that we are gathered here peacefully is a testament to the leadership of the country as well as those defending the safety of the country. That is why we are against any demonstrations."

The thousands of yellow-clad protesters, who slept on the streets near the city's Independence Square, had woken on Sunday to mass exercises and a resumption of the previous day's peaceful demonstration.

This is a watershed moment. Malaysians are united in their anger at the mismanagement of this country.

Azrul Khalib, protester

They still wore yellow, despite Bersih's official T-shirts and logo being banned by police.

Initial crowds appeared smaller than Saturday, when police said 29,000 had gathered, while Bersih said 200,000 had turned out.

Authorities have blocked the organiser's website and banned yellow attire and the group's logo in a bid to deter the rallies, which were also held in other Malaysian cities.

The rally is scheduled to last until midnight on Sunday to usher in Malaysia's 58th National Day.

"This is a watershed moment. Malaysians are united in their anger at the mismanagement of this country," said protester Azrul Khalib, who slept on the street with his friends.

"We are saying loudly that there should be a change in the leadership." 

He said he was aware that the rally would not bring change overnight, but he wanted to be "part of efforts to build a new Malaysia".

Former Prime Minister Mahathir Mohamad, who has been spearheading calls for Najib's resignation, added momentum to the rally when he made a surprise brief appearance late on Saturday with his wife to loud cheers from the crowd, telling protesters to "carry on".

Former Malaysian PM Mahathir Mohamad joined the protesters and told them 'the only way for the people to get back to the old system is for them to remove this prime minister' [Reuters]

Najib has been fighting for political survival after leaked documents in July showed hundreds of millions linked to indebted state fund 1Malaysia Development Berhad had been deposited into his private accounts.

He later said the money was a donation from the Middle East, and fired his critical deputy and four other cabinet members as well as the attorney general investigating him.

 Malaysia: Crackdown on Freedom

The prime minister earlier slammed the protests for tarnishing Malaysia's image.

"Those who wear this yellow attire ... they want to discredit our good name, scribble black coal on Malaysia's face to the outside world," Najib was quoted as saying by national news agency Bernama.

Deputy Prime Minister Zahid Hamidi, who is also home minister in charge of domestic security, warned organisers faced possible charges under assembly, sedition and other laws.

"What is important is that I am empowering the police to take action," he was quoted as saying by Malaysian media.

Support for Najib's National Front has eroded in the last two general elections. It won in 2013, but lost the popular vote for the first time to an opposition alliance.

Authorities have blocked the organiser's website and banned yellow attire and the group's logo in a bid to deter the rallies [AP]

Source: Agencies