Rising credit card debts

Nov 21, 2008

FEARS that the growth in consumer loans was fuelling a credit bubble were dismissed by Finance Minister Tharman Shanmugaratnam yesterday, but he said the situation will be monitored.

Mr Tharman told Parliament that consumer loans rose 10 per cent in September compared with the same month last year, largely in line with economic growth and the property boom. Total consumer loans amounted to about $112 billion as at Sept 30.

But he said the 'fairly significant growth' of credit card loans - up 19 per cent in September over last year - 'should be watched carefully'.

Credit card debts increased in absolute amount by $840 million from September last year to this September, which may be in line with economic growth and greater card use, but the Government believes a closer watch is warranted.

'The Monetary Authority of Singapore (MAS) is monitoring this, but as of now there is no serious cause for concern and we will stay in touch with the banks,' said Mr Tharman.

MP Seah Kian Peng (Marine Parade GRC) had earlier asked whether the growth of personal debt over the past 12 months warranted a review of the eligibility criteria for personal credit lines.

Mr Tharman responded by saying that the rules laid down by the MAS were stricter than in most other countries.

Credit card applicants must have an annual income of $30,000 and the maximum credit limit is capped at twice the user's monthly income. Other unsecured credit loans are capped at twice a borrower's monthly income.

Mr Tharman said: 'We would be concerned if financial institutions are lending without regard for credit standards and risk assessment, and borrowers are taking credit without considering if they can afford it.' But he added that the MAS rules and criteria used by financial institutions meant sound lending standards were in place in Singapore. Most of the growth of consumer loans was due to mortgages - no surprise 'given the buoyant property market in 2006 and 2007', he said.

Other forms of secured credit like car loans increased 'marginally' while share financing had fallen, he said. The total amount outstanding on credit and charge cards rose over the past year, but this was consistent with growth in previous years, he added. The rise also reflected the increased use of credit and charge cards.

Source :http://www.straitstimes.com/Breaking%2BNews