New Borrowing Criteria by MAS

Balance To Income

Do take note of this term, Balance to income, or BTI.

This new ruling will well affect most SME business owners in Singapore. One of the criteria in taking up a business loan in Singapore is the creditworthiness of the director.

With regards to the Monetary Authority of Singapore, they have set a borrowing limit on the outstanding interest-bearing balances on credit cards and other unsecured credit facilities that individuals may have with financial institutions in Singapore (“interest-bearing balances”).

Interest bearing (IB) balances refer to balance transfer, personal loan, cash advance, overdue balances or balances that attract interest, etc. This includes earmarked unposted balances.

Financial institutions will be required to review a borrower’s total debt and credit limits before granting a new credit card or unsecured credit facility, or increasing the credit limit on such facilities. This is to enable a more realistic assessment of an individual’s borrowing capacity.

The introduction of Balance To Income (BTI) across Financial Institutions (FI) in Singapore is intended to help borrowers avoid accumulating further debt.

When your BTI ratio exceeds the prevailing cap for 3 consecutive months, you will not be able to:

charge new amounts to your existing credit cards and/or unsecured facilities with all banks;
request for credit limit increases on existing credit cards and/or unsecured facilities with all banks;
apply for new credit cards and/or unsecured facilities with all banks.
request for a credit limit increase on existing unsecured facilities.
apply for new unsecured facilities.

The BTI cap is phased in as follows:

24 times of your monthly income with effect from 1 June 2015
18 times of your monthly income with effect from 1 June 2017
12 times of your monthly income with effect from 1 June 2019

Exception

This rule does not apply to:

• unsecured loans for needs-based purposes (e.g. business, medical and education);

• borrowers with an annual income of $120,000 or more; and

• borrowers with net personal assets exceeding $2 million

Lifting a suspension

To remove a suspension:

The borrower needs to reduce its debt below the prevailing limit.
The bank has to conduct a fresh credit bureau and income checks on the borrower.

Banks have the additional discretion to lift the suspension and issue new facilities to consolidate and refinance the borrower's existing debts with other banks.

Banks are also allowed to exceed the regulatory credit limits as part of such debt consolidation.

These concessions are to enable the borrower to benefit from refinancing debt at lower interest rates by consolidating their debt with one bank.