Banks to set loan cap for low income borrowers

National 1 minute, 51 seconds


INDIVIDUALS with a net monthly salary below $1,750 will have their total debt service ratio (TDSR) or loan cap subject to the discretion of the bank from which they want to borrow, the Autoriti Monetari Brunei Darussalam (AMBD) said yesterday.

The central bank said that individuals earning less than $1,750 would need to contact their respective financial institutions to find out more about their “policy on TDSR and minimum take home pay requirement”.

AMBD said this in response to an article published yesterday by The Brunei Times in which a car sales official said the central bank had yet to clarify the rate of the loan cap for those earning a net salary of under $1,750.

On its website, AMBD said that individuals under that income level will still have access to credit financing while being subject to the bank’s own requirements for TDSR.

“Any current internal policy changes on TDSR (by financial institutions) will be subjected to AMBD’s approval to ensure that banks or finance companies take responsibility in ensuring borrowers are not overburdened with debt and have sufficient disposable income and at the same time, for banks and finance companies to continue providing financial access,” AMBD said.

As for those earning a net income of more than $1,750 per month, AMBD noted that the TDSR must not exceed 60 per cent.

Last month, a study on financial literacy revealed that half of Bruneian households did not have active savings with one in four needing loans to finance their daily necessities.

The study, done by AMBD and the Centre for Strategic and Policy Studies, found that among the 1,521 households surveyed, 34 per cent did not plan for household expenditure.

Out of the same number of households, 32 per cent did not know of the interest rate imposed on their credit cards while 24 per cent depended on loans to buy necessities.

Apart from the loan cap, AMBD also introduced other new regulations including the requirement to obtain insurance protection for new and restructured (top up) facilities and regulating early settlement fees to encourage customers to clear their loans.

AMBD has also regulated the issuance fees for the Certificate of Balance and Clearance Letter as well as Restructuring and Prepayment fees.

The Brunei Times