Salary loans subject to tighter monitoring

MANILA, Philippines – The country’s central bank has further tightened the monitoring of salary loans as it expanded the coverage for this type of credit accommodation.
 
The Bangko Sentral ng Pilipinas (BSP) said September 9 that it issued the new guidelines on the monitoring of salary loans, further enhancing the initial regulations under Circular No. 837 released in June 2014. (READ: Salary loans under intensified watch)
 
Under the new guidelines, BSP said salary loans had been renamed to salary-based general-purpose consumption loans and redefined primarily to emphasize the nature and purpose of the said loans.
 
BSP explained that these loans would now refer to “unsecured loans for a broad range of consumption purposes, granted to individuals mainly on the basis of regular salary, pension or other fixed compensation, where repayment would come from such future cash flows, either through salary deductions; debits from the borrower’s deposit account; mobile payments; pay-through collections; over-the-counter payments; or other type of payment arrangement agreed upon by the borrower and lender.”
 
The bank regulator said the definition also now covers credit accommodation for education, hospitalization, emergency, travel, household, and other personal consumption needs.

Latest data from the BSP showed consumer loans, including real estate, consumer, credit card, and salary loans jumped 27% to P932.78 billion ($19.89 billion) from January to March this year or P197.68 billion ($4.22 billion) higher compared to P735.1 billion ($15.67 billion) in the same period last year.
 
Real estate loans went up by 25.8% to P411.44 billion ($8.77 billion) in the first quarter from P326.92 billion ($6.97 billion) in the same period last year. Auto loans increased 25.8% to P244.61 billion ($5.22 billion) from P194.37 billion ($4.14 billion).

Credit card receivables went up by 4.2% to P159.84 billion ($3.41 billion) from P153.4 billion ($3.27 billion), while salary loans jumped 20.6% to P76.12 billion ($1.62 billion) in end-March from P63.12 billion ($1.35 billion) in end-December.

Clarification

The BSP clarified though that the salary-based general-purpose consumption loans would not include credit cards, motor vehicles, and other personal loans covered under other existing BSP regulations.
 
Under the new guidelines, the central bank said banks and non-stock savings and loan associations (NSSLAs) are required to adopt credit granting standards and policies specific to salary-based general-purpose consumption loans.
 
The standards would cover comprehensive assessment of creditworthiness; determination of individual borrowing capacity; setting of limit on loan term; and requirements for loan “takeout.”
 
The BSP set the original loan maturity for this loan at a maximum of 3 years, but it may be extended under meritorious cases as long as maturity shall not exceed 5 years.
 
Banks and NSSLAs are given 6 months from the effectivity of the guidelines to adopt or amend their policies, procedures, and credit risk strategy on salary-based general-purpose consumption loans to comply with the guidelines.

Banks and NSSLAs should also start adopting the revised reporting templates starting with the reporting period ending September 2015. – Rappler.com

$1 = P46.88

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