BANKS in Singapore insist that it's business as usual at their loans department. However, anecdotal evidence suggests that borrowing from a bank has become a tad more difficult for individuals and companies.

Of course, given the current economic uncertainty, it would not be odd for banks to be more tight-fisted with their cash. Yet, while caution is fine, overcautiousness is not. For if credit should prove more difficult to obtain for even the creditworthy, it would make it all the harder for the economy to regain its former strength. Banks are a crucial part of a modern economy's infrastructure, funding present needs against the future income of individuals and companies. The economy can't afford for banks to go missing in action.

Very likely, banks really have not changed their consumer or commercial lending criteria. Yet, this does not mean they have not taken away the ability of loan officers to exercise more discretion in evaluating applications, for example. It could be that lending now is strictly by the book, with no leeway allowed for previously acceptable special circumstances. The official numbers aren't yet in, but as a Sunday Times story reported: 'Car dealers said a credit crunch is hitting vehicle buyers...with rejection rates estimated to have gone up from 15 to 25 per cent.' The same story also reported real estate industry insiders saying that banks have been seen offering lower financing for home purchases, which means that those prospective buyers affected will have to come up with larger down payments. This could further dampen real estate sales.

Concerns are as much that companies are finding it hard to secure operating loans. Credit is the bridge between accounts payable and receivable. Difficulties securing working loans can hurt even companies with firm orders on their book. Suppliers - and staff - need to be paid before invoices issued are finally settled. If companies can't secure operating credit, they won't be able to fulfil orders.

Certainly, lenders are right to be careful with their money, particularly with unsecured lending like credit card lines. At the same time, no one has an entitlement to loans, to the banks' money. Credit will go - as it should go - only to the creditworthy. The issue is determining creditworthiness. One must hope that banks are not erring on the side of overcautiousness. The mantra in the banking industry is 'prudence'. On that score, one must hope that judgment is being exercised prudently - with not too little and also not too much risk aversion - in determining who gets credit.

This article was first published in The Straits Times on December 16, 2008.