UNSECURED OVERDRAFT-LENDING

UNSECURED OVERDRAFT-LENDING

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(Default rates): **

1.

Ms Sylvia Lim asked the Senior Minister if he will provide information on the default rates and the percentage and amount of unrecovered debt for unsecured overdraft-lending offered by financial institutions in the last 5 years.

Mr Lim Hng Kiang: Unsecured household loans that have defaulted, defined as loans past due for 90 days or longer or loans that exhibited weakness in repayment capability, represented about 1.1% of total unsecured household loans as at September 2006. The figures are 2.6% in September 2004 and 1.8% in September 2005. (Data prior to 2004 are not available.)

Consistent with this decline, the credit card charge-off rate (defined as the amount of bad debts written off divided by total credit card receivables) has also fallen, from 2.9% in Q3 2005 to 2.7% in Q3 2006.

The most effective solution to managing debt is for individuals and households to learn how to better handle their finances. To this end, the MoneySENSE national financial education programme has been working with industry associations to disseminate messages on prudent spending and proper debt management through consumer guides, articles and events.

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