Singapore

MAS aims to help people, firms ease dependence on relief measures

This article is more than 12 months old

It is discussing with banks how borrowers can gradually resume loan repayments

Having ridden to the rescue of companies and individuals during the coronavirus crisis, the central bank has started planning a soft landing for them when the relief measures are rolled back by the end of this year.

It has started discussing with banks how borrowers can gradually resume repayments to them. At the height of the crisis, the Monetary Authority of Singapore (MAS) had thrown such cash-squeezed businesses and individuals a lifeline by allowing them to defer repayments.

Observers said a good exit policy from the relief measures was important as it could otherwise lead to many borrowers defaulting on loans.

Speaking at the release of the central bank's annual report yesterday, MAS managing director Ravi Menon said the relief measures implemented during the pandemic have done their part to help companies and individuals stay afloat.

But bank loans and insurance policy premiums eventually have to be paid, he said.

What MAS was doing was to discuss with banks and insurers how to ease borrowers and policyholders into gradually resuming repayments when the relief measures, which include debt moratoriums on mortgage payments, finally draw to a close.

"We will not have a cliff effect - which means it's not as if all will be withdrawn on Dec 31," he said.

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"I (also) don't think we can continue (providing) these reliefs indefinitely, because the longer you continue them, the more at risk some of these borrowers will be in terms of repayment," he added.

Outlining the scale of the relief operations, he said banks have deferred payments on principal or interest, or both, on about 34,000 mortgage loans until Dec 31.

They have also deferred both principal and interest payments on more than 2,100 renovation and education loans.

Meanwhile, more than 25,000 life and health insurance policyholders have deferred their premiums while maintaining coverage.

Payment deferments have also been made on more than 5,300 small and medium-sized enterprises' secured loans.

"But deferred payments provide only temporary relief and come with longer-term costs," he pointed out.

Mr Menon said the central bank aims to announce the results of its analysis with the banks by October to give debtors time to prepare for their repayments.

Singapore Business Federation chief executive Ho Meng Kit agreed businesses must accept that at some point banks would cut back on the financing available to them.

"Unwinding a large pile of bad debt can cost other problems for the economy," he noted.

"We hope MAS... will provide businesses with adequate notice and a glide path on the withdrawal of the relief measures," said Mr Ho.

Association of Small and Medium Enterprises president Kurt Wee hopes MAS "will not wind down help" and extend the existing relief measures.

"Businesses will continue to require the support of MAS for the duration that we are impacted by Covid-19," he added.

"If there is a departure from the current pre-election measures, businesses will find the adjustment overwhelming because they are already subjected to tremendous restrictions to how far they can operate their businesses," Mr Wee said.

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