Sharidan Ali's article in the online STAR is worth reading if you hold too many credit cards.
" There are plans in the pipeline to impose stricter credit-card and personal-loan limits to maintain household debts in Malaysia at a healthy level.
According to a banking source, Bank Negara is said to be looking into elements of household financing and may come out with preventive measures.
Chatter within the financial circles reveals that such measures are to ensure that total household debt is kept under control and may see new and tougher limits on the number of credit cards a person can hold as well as a lower cap on how much a person can borrow as personal loan.
“The central bank is still in discussion on the matter and has not reached any decision yet. But, if it decides to implement the measures, it is all purely prudent and pre-emptive as the general non-performing loan ratio is still at a sound level,” the banking source told StarBiz.
The steps being considered are to prevent a build-up of household debt to gross domestic product (GDP), which stood at 76% or around RM516.6bil last year against 63.9% in 2008. The figure averaged around 67% from 2005 to 2008.
Checks with banks showed that the credit-card limit was at the banks’ discretion but first-time applicants were usually given limits of between 2.5 times and three times their salaries. And the credit limit was likely to be gradually increased based on payment history and usage.
For personal loans, the average limit is about four to five times a person’s salary. Some banks offer a flat interest rate of 10.5% while others give between 8.5% and 17%, depending on the loan amount and repayment period.
On average, the maximum amount for a personal loan is between RM100,000 and RM150,000 but it could also be higher if a person’s monthly income is high.
On Monday, StarBiz reported that although household non-performing loan ratio had been on an improving trajectory since December 2008 to 2.5% as at June, the sector’s debt burden had also been increasing steadily, partly due to greater appetite for borrowed funds and also as a result of strategies used by banks.
Personal loans and credit cards on average made up 5% and 3% respectively of banks’ total loans.
Under Budget 2010, a RM50 service tax for principal credit-card holders was introduced with an aim to reduce the nation’s credit-card debt.
Kenanga Research, in a recent sector update, said the consumer segment was still the sole driver for banking system loan growth.
“In July, hire-purchase loans continued to register strong growth rate of 8.8% year-on-year (yoy), the strongest growth rate over the past 12 months,” it said. “Hire-purchase loans in June was 8.4% yoy.”
“Housing loan growth of 14% yoy in July was marginally higher than 13.7% in June,” it added.
The move to curb excessive household debt obligations comes about a week after the news of a possible 80% loan-to-value ratio for mortgages to avert the risk of a property bubble.
As at end-2009, home loans represented 25% of the banking system’s approved loans.
However, the 80% loan-to-value ratio may not be implemented across the board as some banks have suggested it should be more for high-end properties and investments.
Chatter within the financial circles reveals that such measures are to ensure that total household debt is kept under control and may see new and tougher limits on the number of credit cards a person can hold as well as a lower cap on how much a person can borrow as personal loan.
“The central bank is still in discussion on the matter and has not reached any decision yet. But, if it decides to implement the measures, it is all purely prudent and pre-emptive as the general non-performing loan ratio is still at a sound level,” the banking source told StarBiz.
The steps being considered are to prevent a build-up of household debt to gross domestic product (GDP), which stood at 76% or around RM516.6bil last year against 63.9% in 2008. The figure averaged around 67% from 2005 to 2008.
Checks with banks showed that the credit-card limit was at the banks’ discretion but first-time applicants were usually given limits of between 2.5 times and three times their salaries. And the credit limit was likely to be gradually increased based on payment history and usage.
For personal loans, the average limit is about four to five times a person’s salary. Some banks offer a flat interest rate of 10.5% while others give between 8.5% and 17%, depending on the loan amount and repayment period.
On average, the maximum amount for a personal loan is between RM100,000 and RM150,000 but it could also be higher if a person’s monthly income is high.
On Monday, StarBiz reported that although household non-performing loan ratio had been on an improving trajectory since December 2008 to 2.5% as at June, the sector’s debt burden had also been increasing steadily, partly due to greater appetite for borrowed funds and also as a result of strategies used by banks.
Personal loans and credit cards on average made up 5% and 3% respectively of banks’ total loans.
Under Budget 2010, a RM50 service tax for principal credit-card holders was introduced with an aim to reduce the nation’s credit-card debt.
Kenanga Research, in a recent sector update, said the consumer segment was still the sole driver for banking system loan growth.
“In July, hire-purchase loans continued to register strong growth rate of 8.8% year-on-year (yoy), the strongest growth rate over the past 12 months,” it said. “Hire-purchase loans in June was 8.4% yoy.”
“Housing loan growth of 14% yoy in July was marginally higher than 13.7% in June,” it added.
The move to curb excessive household debt obligations comes about a week after the news of a possible 80% loan-to-value ratio for mortgages to avert the risk of a property bubble.
As at end-2009, home loans represented 25% of the banking system’s approved loans.
However, the 80% loan-to-value ratio may not be implemented across the board as some banks have suggested it should be more for high-end properties and investments.
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