MAS tightens borrowing rules for people heavily in debt

Borrowing rules will be tightened for the people who are in heavy debt, announced the Monetary Authority of Singapore today. This will help the borrowers avoid accumulating excessive unsecured debts.

The new measure will be implemented from January 1, 2018. Under the new measure, a borrower with outstanding unsecured debts exceeding six times his monthly income will not be able to tap on new unsecured credit lines. This means he cannot get an increase in his existing credit limit or obtain new unsecured credit that will cause his total credit limit to exceed 12 times of his monthly income.

The new measure will help the borrowers avoid accumulating excessive unsecured debts.
The new measure will help the borrowers avoid accumulating excessive unsecured debts. Photo courtesy: MAS

The new measure applies to interest-bearing balances of unsecured credit facilities such as credit cards, personal loans, and overdrafts. It does not apply to secured credit facilities such as housing loans and motor vehicle loans, as well as loans for medical, education or business purposes.

Under the new measure, borrowers can still use their existing credit facilities, and they will not be required to reduce the limit of those facilities as well.

Reflecting on the borrowing scene in Singapore, MAS said, “Since the introduction of the industry-wide borrowing limit in June 2015, the number of highly indebted borrowers – those with outstanding unsecured debts exceeding their annual income – has come down by about 21,000, from five per cent to below four per cent of total unsecured borrowers. However, since January 2017, an average of about 4,000 borrowers per month have increased their unsecured debts to above 12 times their monthly income compared to the previous month.  

Loo Siew Yee, MAS Assistant Managing Director (Policy, Risk & Surveillance), said, “We are making steady progress in helping borrowers manage their unsecured debts. The industry-wide borrowing limit has reduced the overall number of highly indebted borrowers. Several assistance schemes and repayment plans, such as the Debt Consolidation Plan launched earlier this year by The Association of Banks in Singapore, are available to help these borrowers work down their existing debts.

She added, “The measure announced today is pre-emptive in nature – it will help borrowers manage their unsecured debts early and avoid becoming highly indebted.”

The move aims to help borrowers with outstanding unsecured debts of between six and 12 months of their monthly income. There are an estimated 60,000 borrowers in this pool, making up around four4 per cent of the total number of unsecured credit users.

Author
Ashraf Jamal
Ashraf Jamal – Senior Writer

Ashraf Jamal brings a rare depth to writing equipped with a degree in journalism, a postgraduate degree in political science, and a degree in law from the Allahabad University. His experience includes editing and publishing the Northern India Patrika and writing for Times of India for almost a decade covering just about any topic under the sun including NRIs and Indian diaspora.

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