Impact of MAS' Imposition of Borrowing Limit on Easing of Individual Indebtedness
Prime Minister's OfficeSpeakers
Summary
This question concerns Ms Foo Mee Har’s inquiry regarding whether the Monetary Authority of Singapore’s (MAS) 12-month income borrowing limit has successfully eased individual indebtedness. Minister Lawrence Wong explained that unsecured credit limits are being phased in over four years, decreasing from 24 times monthly income in 2015 to 12 times by 2019. From February to November 2015, borrowers exceeding the 24-times limit halved to approximately 17,000, while those exceeding the 12-times limit decreased by 14% to 72,000. Minister Lawrence Wong noted that these groups represent only 1% and 4% of all unsecured credit borrowers, respectively, as the vast majority continue to use credit prudently. He highlighted that indebted individuals can seek help from financial institutions or Credit Counselling Singapore to develop repayment plans and access assistance schemes.
Transcript
50 Ms Foo Mee Har asked the Prime Minister whether there has been a gradual easing of individual indebtedness as a result of MAS' imposition of the aggregated borrowing limit of 12 months' income.
Mr Lawrence Wong (for the Prime Minister): The Monetary Authority of Singapore (MAS) announced in April 2015 that the limit on the amount of unsecured credit that a borrower can take on across all financial institutions (FIs) would be phased-in over four years. The borrowing limit was set at an initial level of 24 times a borrower’s monthly income from 1 June 2015. This will be lowered progressively to 18 times from 1 June 2017 and 12 times from 1 June 2019.
Since the introduction of the borrowing limit, the number of borrowers with unsecured debt exceeding 24 times of monthly income has approximately halved, from around 32,000 in February 2015 to around 17,000 in November 2015. This reduced number represents around 1% of all unsecured credit borrowers.
The number of borrowers whose unsecured debt exceeds 12 times their monthly income has also dropped by about 14%, from around 84,000 borrowers in February 2015 to around 72,000 borrowers in November 2015. This reduced number makes up about 4% of all unsecured credit borrowers.
The vast majority of borrowers use credit prudently and are not affected by the aggregate borrowing limit. We encourage indebted borrowers to reduce their outstanding unsecured debts over time. They can seek help from their FIs or Credit Counselling Singapore, which can help work out repayment plans and offer various assistance schemes.