SINGAPORE - Tighter rules to cap the amount of credit card and other unsecured loans that banks can extend to individuals will be implemented in stages from December.
The changes are a bid to rein in borrowing and prevent people from falling deeper into debt.
They include a limit on the total amount of unsecured loans an individual can take to 12 times the person's monthly income.
They are "aimed at improving lending practices by financial institutions and enabling individuals to make better borrowing decisions", the Monetary Authority of Singapore (MAS) said yesterday.
Singapore, which has a population of 5.3 million, had 9.3 million credit cards in circulation at the end of 2012, up from 8.3 million at the end of the previous year, reported Reuters. Banks wrote off $226.6 million in bad debt last year, an increase of 21 per cent from end-2011.
The ratio of household debt to gross domestic product in Singapore is one of the highest in Asia at around 75 per cent, up from 55 per cent in 2010 and 45 per cent in 2005, according to a recent report by Standard Chartered.
But people in Singapore, which has more millionaires per capita than any other country, also own lots of assets, so the debt-to-asset ratio is low relative to other Asian countries, Standard Chartered added.
With the new rules, banks will be required to review a borrower's total debt and credit limits before granting a new credit card or unsecured credit facility. Banks must also carry out such reviews before increasing the credit limit on such facilities, MAS said.
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