Over-extended borrowers in Singapore total 84,000 people owing S$7.5b (Update)

THE number of over-extended borrowers in Singapore totals 84,000 people who owe S$7.5 billion, said the Monetary Authority of Singapore (MAS).

The 84,000 over-extended borrowers make up 5 per cent of total unsecured borrowers and the amount they owe represents less than 0.4 per cent of the total banking assets of Singapore, the MAS said.

The data on over-extended borrowers, defined as those owing unsecured debt of more than 12 times monthly income, was released on Monday as the MAS phases in borrowing limit on unsecured credit facilities.

Borrowers with unsecured debt of more than 24 times monthly income as at end February number 32,000 who owe S$4 billion, which makes up 0.2 per cent of total banking assets.

The MAS will phase in a tighter limit on credit card debt and other unsecured credit facilities over four years so as to give affected borrowers more time to cut their debt.

MAS said the decision to give over-extended borrowers more time to adjust to the new measures comes after consultations with the Association of Banks in Singapore (ABS) and Credit Counselling Singapore (CCS), and feedback from the public.

In September 2013, MAS announced that financial institutions such as banks will not be able to grant further unsecured credit to someone whose outstanding unsecured debt, across all financial institutions, is more than 12 times his monthly income for three consecutive months. The rule aims to help individuals avoid accumulating excessive debt.

MAS said that the new limit on the total amount of credit card and other unsecured debt that can be held will be implemented in phases:

From June 1 this year, the limit will be 24 times monthly income; from June 1, 2017, the limit will be 18 times monthly income; from June 1, 2019, the limit will be 12 times monthly income.