Explainers
 Published Date: 30 May 2017

Credit Limit Management Measure

Borrowers who have accumulated unsecured debt exceeding 6 times their monthly income cannot obtain new credit facilities that will cause their total credit limit to exceed 12 times monthly income. They can still draw on existing credit facilities.

Applies to: Full Bank (Locally Incorporated) , Full Bank (Branch) , Wholesale Bank (Locally Incorporated) , Wholesale Bank (Branch) , Credit/Charge Card Issuer , Merchant Bank (Branch) , Merchant Bank (Locally Incorporated) , Finance Company

Credit Limit Management Measure

MAS introduced the Credit Limit Management Measure (CLMM) to help borrowers to avoid becoming highly indebted with early intervention.

Under the CLMM, if a borrower has accumulated outstanding unsecured debt (i.e. unpaid, interest-bearing balances) exceeding 6 times their monthly income, a financial institution (FI) will not be allowed to grant them any increase in credit limit or any new unsecured credit facilities that will cause their total credit limit to exceed 12 times their monthly income.

Affected borrowers can continue to draw on their existing credit facilities and will not be required to reduce their existing credit limits.

What Counts as Unsecured Debt

This measure applies to interest-bearing balances of unsecured credit facilities such as credit cards, personal loans and overdrafts.

It does not apply to certain loans, such as:

  • Secured credit facilities such as housing loans and motor vehicle loans.
  • Loans for medical, education or business purposes.

Refer to MAS Notice 635 or the Banking (Credit Card and Charge Card) Regulations 2013 for full details.

Examples

The following examples illustrate how the rules are applied:

Example 1

Mrs Wong earns S$4,000 a month, and her current total credit limit is S$48,000, or 12 times her monthly income. She owes S$8,000 outstanding unsecured debt.

Since her debt is less than 6 times her monthly income, Mrs Wong can apply for more credit.

Example 2

Mr Hafiz earns S$4,000 a month, and his current total credit limit is S$40,000, or 10 times his monthly income. He owes $26,000 in outstanding unsecured debt.

As Mr Hafiz's outstanding debt is more than 6 times his monthly income, he can apply for additional unsecured credit of up to $8,000 (2 times his monthly income).

Example 3

Mr Lim earns S$4,000 a month, and his current total credit limit is S$52,000, or 13 times his monthly income. He owes S$40,000 outstanding unsecured debt. His debt is over 6 times his monthly income, and his credit limit is over 12 times his monthly income.

Mr Lim cannot apply for any more unsecured credit.