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Publication Date: May 30, 2017
Credit Limit Management Measure
In an effort to promote financial prudence and early intervention to mitigate indebtedness risks, the Monetary Authority of Singapore MAS introduced the Credit Limit Management Measure CLMM. The CLMM specifically targets borrowers who have accumulated unsecured debt exceeding six times their monthly income.
Under this measure, any financial institution FI, including but not limited to full banks, wholesale banks, credit card issuers, merchant banks, finance companies, and others, is prohibited from granting an increase in credit limit or issuing new unsecured credit facilities that will result in a borrower's total credit limit exceeding twelve times their monthly income when they have outstanding unsecured debt surpassing six times this figure. This restriction ensures that borrowers are not disproportionately burdened with debt relative to their income.
However, it's important to note that existing credit lines can still be utilized by affected individuals without the requirement to reduce current credit limits. The measure does not ext to secured loans such as housing or vehicle mortgages nor specifically targeted loans like those for medical expenses, education needs, or business purposes.
The definition of unsecured debt for this purpose includes interest-bearing balances on credit cards, personal loans, and overdrafts among others.
In the following examples, we illustrate how CLMM applies in different scenarios:
Example 1: Mrs. Wong earns SGD 4,000 monthly with a total credit limit of SGD 48,000 equivalent to twelve times her monthly income. She owes an outstanding unsecured debt of SGD 8,000. Since her debt is below the six-times-income threshold, she can apply for additional credit.
Example 2: Mr. Hafiz earns SGD 4,000 a month with a total credit limit of SGD 40,000 equivalent to ten times his monthly income. He owes SGD 26,000 in outstanding unsecured debt. As his debt exceeds six times his monthly income, he can request up to SGD 8,000 in additional unsecured credit double his monthly income.
Example 3: Mr. Lim earns SGD 4,000 a month with a total credit limit of SGD 52,000 equivalent to thirteen times his monthly income and owes SGD 40,000 outstanding debt. His indebtedness exceeds six times his income, yet his credit limit surpasses twelve times this amount. As such, Mr. Lim is unable to apply for any additional unsecured credit.
For further detls on the full scope of MAS Notice 635 or Banking Credit Card and Charge Card Regulations 2013, please refer to their official sources.
Monetary Authority of Singapore
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December 1, 2022
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