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    MAS Move to Curb Excessive Unsecured Borrowing Gets Thumbs up from Banks

    Banks lauded MAS move to limit additional unsecured borrowing for individuals who already have unsecured debts exceeding 6 times their monthly income.

    Bankbazaar Singapore – 20, December 2017

    The Monetary Authority of Singapore’s (MAS) recent move to cap the unsecured borrowing appears to have gone down well with Singaporean banks and financial institutions. According to a media report, the Director of the Association of Banks in Singapore, Ong-Ang Ai Boon, said that the new measure will help individuals avoid piling up their unsecured debt. As per the report, various Singaporean banks welcomed the development saying that it will help individuals manage their finances better.

    MAS’s new measure, which comes into effect from 1 January 2018, limits the extra unsecured borrowing for individuals who already have significant existing unsecured debts. Any individual with outstanding unsecured loans higher than six times their income per month will not be allowed any hike in their credit limit or a new credit facility, if it’s causing their total credit limit to be more than 12 times their income per month.

    Currently, MAS allows individuals to borrow up to 18 times their monthly income. However, effective 1 June 2019, this limit is scheduled to come down to 12 times.

    The new measure comes as some borrowers are still taking unsecured loans. According to MAS, starting January 2017, every month around 4,000 borrowers, on an average, went on to increase their unsecured borrowing to over 12 times their income per month, as against the previous month.

    The central bank also added that the number of “highly indebted” borrowers in Singapore have come down since the introduction of the industry-wide borrowing limit in June 2015. The industry-wide borrowing limit does not allow individuals to use their existing credit facilities, as well as from taking any new facility, if their unsecured debts continue to exceed the prevailing limit for three months in a row. MAS stated that the new measure will help individuals avoid hitting the industry-wide borrowing limit.

    MAS Assistant Managing Director (Policy, Risk & Surveillance), Loo Siew Yee believes that the central bank is making progress towards helping individuals manage their unsecured loans. She added that the industry-wide borrowing limit, coupled with various other repayment plans and assistance schemes, have helped individuals bring down their debts.

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