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FIs disallowed from granting further unsecured credit to borrowers whose outstanding interestbearing unsecured debt aggregated across FIs exceed the borrowing limit as specified by MAS for 3 consecutive months or more (“borrowing limit”). The borrowing limit is:

(a) 24 times monthly income with effect from 1 June 2015;

(b) 18 times monthly income with effect from 1 June 2017; and

(c) 12 times monthly income with effect from 1 June 2019.

How is a borrower’s aggregate outstanding debt computed for the purpose of this rule?

FIs are required to take only a borrower’s interest-bearing unsecured debt into account for the purpose of this rule. Interest-bearing unsecured debt includes amounts rolled over on credit cards (i.e. amounts that are not repaid in full by the due date) and outstanding amounts on unsecured loans that accrue interest.

 

Amounts charged to credit cards that are fully repaid by their due dates typically do not attract interest, and do not have to be taken into consideration for the purpose of this rule.

 

Likewise, amounts outstanding on interest-free instalment plans that do not attract interest do not have to be taken into consideration. However, if interest is imposed on a particular instalment, for example due to late payment, this instalment amount will have to be included in the borrower’s aggregate unsecured debt

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