Following the Monetary Authority of Singapore’s (the “MAS”) announcement in September 2013 toprohibit financial institutions (“FIs”) from granting further unsecured credit to a borrower whose outstanding unsecured debt across all FIs exceeds 12 times his monthly income for three consecutive months, the MAS announced on 6 April 2015 that over-extended borrowers will be given more time to adjust to the new measure.
The MAS has decided to phase in the borrowing limit over four years as follows:
- 24 times monthly income from 1 June 2015;
- 18 times monthly income from 1 June 2017; and
- 12 times monthly income from 1 June 2019.
FIs will not be allowed to grant further unsecured credit to an individual whose unsecured borrowings exceed the prevailing borrowing limit for three consecutive months. The rule aims to help individuals avoid accumulating excessive debt.
Repayment Assistance Scheme
At the same time, the Association of Banks in Singapore (the “ABS”) announced on 6 April 2015 the introduction of a centralised repayment solution known as the Repayment Assistance Scheme (the “RAS”). The RAS aims to help borrowers reduce their unsecured debts over time.
The Credit Counselling Singapore (the “CCS”) will administer the RAS by coordinating all of a borrower’s creditor FIs to work out a centralised repayment solution. The RAS is offered at a lower interest rate of 5% per annum and over a period of eight years to help borrowers pay down debts that are in excess of 12 times their monthly incomes before 1 June 2015. Borrowers must apply for the RAS by 31 December 2015.
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