Parliamentary Replies
Published Date: 11 March 2015

Reply to COS Cut on Individual Indebtedness

For Parliament Sitting on 10 March 2015

Name and Constituency of MP
Ms Foo Mee Har, MP for West Coast GRC

The MAS has announced that effective June 2015 it will impose a borrowing limit of 12 months' income for an individual's aggregated unsecured debt across banks. Whilst this is a prudent measure to help individuals manage their total indebtedness, how this policy is implemented will be of paramount importance. What help will individuals get to restructure their loans to return to a better financial health position and reset their lives? What is the size of the vulnerable group? Are the relevant parties, including Credit Counselling Singapore, sufficiently resourced to handle the cases come June 2015 when the policy comes into force?

Answer by Mr Lawrence Wong, Minister for Culture, Community and Youth on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in Charge of MAS:

1              The overall debt situation in Singapore remains healthy. The vast majority of borrowers will not be affected by the aggregate cap on unsecured borrowing from banks that will come into effect in June 2015 as they borrow within prudent limits. However, an estimated 4-5% of borrowers may be above the 12-month borrowing limit.  MAS is getting from the Credit Bureau a full and more accurate estimate of the number of affected borrowers by the end of this month.

2              I agree with Ms Foo that affected individuals will need help to adjust as well as more time.  MAS has been working closely with key lending banks and Credit Counselling Singapore (CCS) to facilitate the transition.

3              First, since last year, banks have been reaching out to borrowers who may be affected to update their income records so that they will not inadvertently lose access to credit as a result of outdated income information. I encourage borrowers to update their income records with the banks to avoid disruption to their credit facilities.

4              Second, we do need realistic solutions for borrowers who have accumulated significant unsecured debts above their annual incomes, as suggested by Ms Foo. The Association of Banks in Singapore (ABS), the leading retail banks, and CCS have indeed been working on a debt repayment solution for these borrowers. ABS will be announcing the details of this scheme early next month. 

5              Third, CCS has significantly ramped up resources to counsel and help indebted individuals affected by the new rules to manage their debt downwards in an orderly fashion.

6              Fourth, MAS has granted banks the flexibility not to suspend credit for borrowers who already exceed the borrowing limit. These borrowers have up to June 2019 to make the transition. I should also clarify that the borrowing limit does not apply to loans for medical, education or business purposes.

7              Finally, MAS is indeed reviewing the implementation timeline for the borrowing limit on unsecured credit and intends to make further adjustments once the full data on the number of affected borrowers is in.  The details will be announced early next month.