Trade and Industry Minister Lim Hng Kiang told Parliament on Monday that while the Government is committed to freeing up credit flow to companies, there are measures in place to ensure lenders do not abuse the system.

'We have to be careful that the banks don't just transfer all their bad loans to the Government schemes,' said Mr Lim, in reply to Mr Seah Kian Peng (Marine Parade GRC). He said agencies such as the Monetary Authority of Singapore and International Enterprise (IE) Singapore are in constant dialogue with lenders and follow their classification of loans closely.

'If the loan is a non-performing loan, then of course the bank cannot transfer it to the government schemes,' he said.

Mr Seah had voiced his concerns over the possibility of lenders suggesting that clients switch from existing loans to the government loans under the new Special Risk-Sharing Initiative (SRI).

Mr Lim assured the House that lenders here understood the objectives of government-led assistance like the SRI. Nevertheless, the Government retains a 'close audit' of all loans approved, he said.

'We also have a general rule which we extend to the banks: That we don't expect to see more than 30 per cent of refinancing loans, so 70 per cent would be new loans extended to our companies.

'This is in the spirit of why the Government has this credit scheme in the first place - to be able to generate new credit facilities for our companies. So it's with this understanding that we work closely with all the financial institutions.'

According to Spring Singapore, government-backed loans undergo a similar credit assessment and approval process to commercial bank loans.

Read the full story in today's edition of The Straits Times.