The latest measures by the Monetary Authority of Singapore (MAS) and industry bodies will be in place from Monday (6 April) onwards. These measures will allow distressed homeowners to apply to finance company or banks to defer just the principal payment or both principal and interest payments until 31 December this year amid the pandemic.
Deferred interest payments will not accrue interest whereas only the deferred principal amount will accrue interest. As for mortgages, the request for deferment will be approved by lenders provided that the borrower is not in arrears for more than 90 days as at 6 April. There is no need for borrowers to demonstrate any impact from the pandemic to be allowed deferment.
Those with unsecured credit facilities from banks or other credit card issuers can convert their outstanding balances to term loans at a lower rate of interest by applying to their banks. Compared to the rate charged on credit cards at 26 per cent, this term loans rate is limited to 8 per cent. Depending on the person’s ability to pay the minimum monthly repayment, the term can be up to five years for the converted loan.
All individuals who are at risk of incurring considerable arrears and those who have suffered loss of 25 per cent of more in monthly income after 1 February can choose the option provided. Starting from 6 April to 31 December this year, individuals can apply to their lenders to convert their outstanding unsecured debt.
MAS added on Tuesday that SMEs with more than S$40 billion secured borrowings are estimated to qualify to have banks and finance companies defer their principal payments until the end of 2020 during this pandemic.
This qualification is, however, subjected to the assessment of quality of the SMEs’ security by finance companies and banks, which are also expected to assist SME customers to adjust their loan repayment schedules for other types of loan facilities in addition to secured term loans.
SMEs that wish to extend the tenure of their loans until the corresponding principal deferment period can choose do so. This is allowed for SMEs which continue to pay interest and remain in good standing with their banks and finance companies by having not more than 90 days past due on 6 April.
MAS stated that “the relief for individuals and SMEs will be provided on an opt-in basis, as their cashflow circumstances will differ.”
Through the new MAS Singdollar Facility for loans under Enterprise Singapore’s Temporary Bridging Loan Programme and SME Working Capital Loan scheme, banks and finance companies can apply later for low-cost funding. These funds can be applied by banks and finance companies until December this year with the condition that they will pass on the savings in funding cost to their SME borrowers. From this, the interest rates charged on eligible SME borrowers will be lower.
Furthermore, relief measures for individuals and corporates with general insurance policies have also been announced by MAS. Similar to insurance policyholders who decide to defer their policy instalment payments, the debt deferment entails that customers settle the payments later and their total payments will be lifted by the deferment.
MAS also stressed that “Deferring payments increases future obligations and hence borrowers and policyholders should weigh their options carefully. Financial institutions will process all applications expeditiously.”
Banks in Singapore have laid out their own relief packages. These include offers of cashflow assistance and extending out repayments for credit-worthy customers who the three banks (UOB, OCBC, DBS) deem can weather through the pandemic. Nonetheless, the terms have varied.
The first bank to announce relief assistance for Singapore-based companies, particularly SMEs, was UOB, with a sum of S$3 billion. The relief assistance includes servicing their loan interest as well as letting impacted companies rework their principal repayments for up to a year.
OCBC followed suit a day later with the provision of targeted support to impacted customers in its core markets such as Singapore, Hong Kong and Malaysia. The targeted support includes working capital financing of up to S$600,000 at “attractive” rates, collateral-free temporary bridging loan of up to S$1 million with flexible repayment period in addition to a six-month principal moratorium for business loans. Unlike DBS, OCBS has not limited the final number on the estimated magnitude of its relief assistance.
According to DBS, to deal with SMEs’ “most urgent cashflow needs”, it would offer liquidity relief packages to them. This includes an extension of import facilities of up to 60 days alongside a six-month principal repayment moratorium for SME property loans.
The repayment moratoriums for mortgage loans will be according to the criteria set by the banks.
With these new measures, MAS hopes to standardise the terms of various relief packages announced by banks in Singapore amid this current COVID-19 pandemic.