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.
When can FIs lift the suspension imposed on credit cards and unsecured credit facilities (as a result of the borrowing limit)?
A suspension can be lifted only after – (i) the borrower reduces his aggregate interestbearing unsecured debt to less than the prevailing borrowing limit; and (ii) after the FIs have conducted fresh credit bureau and income checks on the borrower.
FIs also have the additional discretion to lift the suspension and issue new facilities to consolidate and refinance the borrower’s existing debts¹³ with other FIs. FIs will also be permitted to exceed the regulatory credit limits as part of such debt consolidation¹⁴. These concessions are to enable the borrower to benefit from refinancing debt at lower interest rates by consolidating his debt with one FI.
¹³ FIs can lift the suspension only for debt transferred from other FIs, but will not be allowed to extend further fresh credit.
¹⁴ The regulatory limits are 4 months’ income for borrowers with annual incomes of at least S$30,000 but less than S$120,000, and 2 months’ income for borrowers with annual incomes of below S$30,000.