This is to avoid good businesses from closing down due to the lack of access to credit.

Mr Tharman said the new measures will enhance existing loans schemes, most of which will involve the Government sharing the risk of the loans with the banks.

Total bank lending to non-bank customers has continued to grow in the 12 months to Sept, but some credit tightening is 'inevitable' given the current economic downturn he told MPs.

Mr Tharman said: 'MAS' assessment is that while there is no large scale credit crisis in Singapore, some segments of borrowers may face higher borrowing costs.'

Responding to a question from MP Lee Bee Wah (Ang Mo Kio GRC) on feedback that banks had stopped lending to smaller businesses, he said: 'We would not want to see good, viable businesses, which are the majority, having to cease business or scale down significantly... because of a lack of access to credit.

'So the Government has been studying this carefully and will be making announcements soon on the enhancement of loan schemes that will invole risk sharing with the banks so that they maintain access to credit on the part of our companies.'

In terms of the interbank market, where banks lend to each other, he told MPs that there has been sufficent liquidity in the system.

'We have not seen the market freeze up as happened in some other global financial centres in recent months. Banks have been able to obtain Singapore dollar funding amongst themselves in an orderly manner,' he said.

'We are unlikely to see this (tightening of bank credit) happen on the scale that is occuring in many other parts of the world, where banks are tightening credit not only because of increased risks that they perceive in a downturn but because they are short of capital.'

In fact, as at end-Sept, total bank lending to non-bank customers is still growing, the minister said.

Loans to the building and construction sector increased by about 50 per cent in the 12 months to Sept compared to the same period last year.

He noted that more small and medium enterprises have tapped into existing schemes, citing that the local enterprise finance scheme (LEFS) and the loan insurance scheme grew by more than 55 per cent in the first eight months from a year ago.

He said that it would be inappropriate for the Government to direct banks to lend or to get involved with who they should lend to.

'These are commercial decisions which banks have to make based on their assessment - assesments of the risks as well as the relationships that they maintain with their customers,' said Mr Tharman.

'Our banks make these assessments carefully and take into account both the short terms risks and their long term interests in keeping their customers. We should continue to leave these decisions to them.'