New Borrowing Criteria by MAS
Balance To Income
Do take note of this term, Balance to income, or BTI.
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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.
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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”).
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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.
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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.
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The introduction of Balance To Income (BTI) across Financial Institutions (FI) in Singapore is intended to help borrowers avoid accumulating further debt.
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When your BTI ratio exceeds the prevailing cap for 3 consecutive months, you will not be able to:
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charge new amounts to your existing credit cards and/or unsecured facilities with all banks;
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request for credit limit increases on existing credit cards and/or unsecured facilities with all banks;
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apply for new credit cards and/or unsecured facilities with all banks.
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request for a credit limit increase on existing unsecured facilities.
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apply for new unsecured facilities.
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The BTI cap is phased in as follows:
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24 times of your monthly income with effect from 1 June 2015
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18 times of your monthly income with effect from 1 June 2017
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12 times of your monthly income with effect from 1 June 2019
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Exception
This rule does not apply to:
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• 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:
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The borrower needs to reduce its debt below the prevailing limit.
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The bank has to conduct a fresh credit bureau and income checks on the borrower.
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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.
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Banks are also allowed to exceed the regulatory credit limits as part of such debt consolidation.
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These concessions are to enable the borrower to benefit from refinancing debt at lower interest rates by consolidating their debt with one bank.