Banks are being more conservative, say observers, but lenders deny tightening credit
ARE banks here starting to play Scrooge when dishing out consumer loans?
Financial institutions are not admitting to it, but they appear to have turned shy in granting loans, especially for property and motor vehicles, some observers say.
‘We do feel they are a shade conservative now. It used to be easy if you wanted to buy a second property,’ said Mr Eugene Lim, associate director of real estate firm ERA Asia-Pacific.
‘Now, they actually pay more attention to the buyer – like the stability of his income, whether the household is one or dual income,’ he said.
Property loans, which used to take three days to be approved, may now take a week, noted MrReeve Ho, senior vice-president of property firm HSR International.
There is now more to-ing and fro-ing in processing loans too, he observed.
‘In the past, they would give the nod if all the documents were in order. Now, even with all the documents in order, they may grant a smaller loan,’ he said.
The Monetary Authority of Singapore (MAS) allows a home buyer to take a loan of up to 90per cent of the home’s purchase price or valuation, whichever is lower.
But banks are granting 60 to 70per cent of the price, said those in the property business.
ERA’s Mr Lim added that a salaried applicant with not more than one property, and hence less likely to be a speculator or to be overstretched, would find it easier to get a loan than someone whose income is commission-based.
Car dealers said a credit crunch is hitting vehicle buyers too, with rejection rates estimated to have gone up from 15 to 25per cent.
But banks such as DBS, OCBC, UOB and Citibank insisted that it is business as usual and they have not tightened credit.
‘Our prudent consumer credit assessment process helps us evaluate the applicant’s ability to service a credit facility such as a car or housing loan, regardless of market conditions,’ said a UOB spokesman.
‘These credit facilities should never become a financial burden to our customers, in good or bad times. Customers with good credit records and stable income should not face problems getting a credit facility from us.’
Citibank said it continues to see steady growth for its credit card and personal credit line, Ready Credit, applications.
‘While we are cognisant of the environment, we make every credit line assignment tailored to the individual customer’s situation.
‘We continue to use rigorous credit criteria which take into account credit history, sources of income and employment status, among others,’ said Mr John Denhof, its business director for credit payment products.
While the latest data from the Credit Bureau of Singapore shows that most credit card and personal loan holders are still managing to pay their bills on time, defaults will likely rise given what happened in the downturn which followed the 2003 Sars outbreak.
The bureau estimates that the rate of default and bad debts could more than double next year if the unemployment rate balloons.
Already, the delinquent rate for personal loans rose from 3.39per cent in July to 4.24per cent in September.
Banks also wrote off 0.21per cent of personal loans in September, up from 0.16per cent in July. The record was 1.08per cent in June 2004.
Mr Song Seng Wun, regional economist at CIMB-GK, is not surprised that banks appear more cautious.
‘Banks are not social welfare institutions. When there’s so much uncertainty about the length and depth of the recession, lenders will look carefully at who they lend to,’ he said.
Long-time customers should not have problems with credit lines. ‘It’s really a case of how well the bank knows you,’ he said.
Source : Sunday Times – 14 Dec 2008
