MAS tightens borrowing rules

SINGAPORE: The island citystate’s central bank announced a new measure yesterday aimed at preventing individuals from accumulating excessive unsecured debts.

The step would cap the additional unsecured credit that a financial institution could extend to borrowers whose outstanding unsecured debts exceeded six times their monthly income, said the Monetary Authority of Singapore (MAS).

Under the new rules, which take effect from January 1, financial institutions would not be allowed to grant any increase in credit limits, or any new unsecured credit facilities that would cause the total credit limit of such borrowers to exceed 12 times their monthly income, said the MAS.

Such borrowers would still be able to draw on their existing unutilised unsecured credit facilities, said the central bank.

“The measure announced today is pre-emptive in nature — it will help borrowers manage their unsecured debts early and avoid becoming highly indebted,” said MAS assistant managing director Loo Siew Yee.

Roughly 60,000 borrowers will be targeted by the new regulation, which applies to interestbearing balances of unsecured credit facilities such as credit cards, personal loans and overdrafts.

The measure won’t apply to secured credit facilities such as housing loans and motor vehicle loans, and also excludes loans for medical, education or business purposes.

The tighter rule complements an existing industry-wide borrowing limit. That ceiling prevents individuals from obtaining new unsecured credit and drawing down on their existing unsecured credit facilities once their aggregate interest-bearing unsecured debts exceed the prevailing borrowing limit for three straight months.

The borrowing limit is currently 18 times a borrower’s monthly income, and will be lowered to 12 times from June 2019. Reuters