MAS, banks said to be in talks to extend debt relief scheme for borrowers hit by Covid-19 pandemic fallout

One of the key measures being discussed by the MAS and local banks is the possibility of lengthening the debt relief programme. ST PHOTO: KUA CHEE SIONG

SINGAPORE (BLOOMBERG) - The Monetary Authority of Singapore (MAS) is in talks with lenders about extending the Republic's debt moratorium programme beyond Dec 31 to provide extra relief to borrowers hit by the fallout from the coronavirus pandemic, according to people with knowledge of the matter.

One of the key measures being discussed by the MAS and local banks is the possibility of lengthening the debt relief programme with industries that have been impacted most by the crisis potentially having aid extended by as many as six months, the people said, asking not to be identified because the talks are confidential.

A tiered approach is being considered, so relief is targeted at those needing the most help, one of the people said. Details of the plan and what types of borrowers will be covered under an extension are still being finalised, they said.

Under the current measures announced in March, small and medium-sized firms can opt to postpone principal payments on their secured term loans until the end of the year. Consumers can defer both principal and interest payments on residential mortgages. Individuals suffering a loss of income can ask for a lower interest rate on unsecured credit.

An extension to the debt moratorium would help mitigate the so-called "cliff effect" on consumers and businesses once relief measures end. Authorities are using both fiscal and monetary tools to provide support against what may be a record recession that came with the pandemic. The government introduced additional support measures of $8 billion last month to cushion the blow from the virus, bringing Singapore's total pledged pandemic aid to more than $100 billion.


MAS managing director Ravi Menon in July said the regulator was talking to banks and finance companies about how to ease borrowers into gradually resuming repayments once the debt relief measures expire.

"We want to avoid 'cliff effects' of a sudden withdrawal of these reliefs," Mr Menon told reporters during the release of the MAS annual report. The central bank has eased monetary policy to help stabilise the economy, and has ensured ample liquidity at financial institutions. It also asked Singapore banks to prioritize lending by capping their dividend payouts.

While Singapore's rate of coronavirus infection is falling and authorities are trying to gradually reopen the economy, many restrictions on businesses and travel remain in place.

Like their global competitors, Singapore's largest lenders, DBS, OCBC and UOB, are bracing themselves for a wave of soured debts. Collectively, they've set aside about $4 billion in provisions for both general and problem loans in the first half of the year, according to data tracked by Bloomberg Intelligence analyst Rena Kwok.

As at June 30, debts under relief programs accounted for about 5 per cent of DBS' total loan book, 10 per cent of OCBC's, and 16 per cent of UOB's, according to their second-quarter results.

Join ST's Telegram channel and get the latest breaking news delivered to you.