Debt-ridden borrowers given more time to repay bank loans

Debt-ridden borrowers will be given more time to repay bank loans before new unsecured credit rules kick in.

The rules, which were first announced in September 2013, restrict financial institutions from granting further unsecured credit facilities or new credit cards to borrowers who hold debts exceeding their annual income for three consecutive months.

The Monetary Authority of Singapore (MAS) has decided to phase the rules in over four years – to give over-extended borrowers more time to adjust:

• From Jun 1, 2015, borrowers who hold debts exceeding 24 times their monthly income will not be allowed to obtain more unsecured credit.
  
• From Jun 1, 2017, this will be reduced to 18 times their monthly income.
  
• From Jun 1, 2019, it will be further reduced to 12 times their monthly income, which is when the unsecured credit rules fully kick in.
  
  

Currently, 32,000 borrowers hold debts exceeding 24 times their monthly income – owing a total of S$4 billion. They make up 2 per cent of total unsecured credit users in Singapore and pose no risk to the banking industry, said the central bank.

It added that financial institutions’ aggregate non-performing loan ratio is low, at 1.1 per cent, as of end-December 2014.

Credit Counselling Singapore and the Association of Banks in Singapore (ABS) will target these borrowers to help them reduce their debts.