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MANILA, Philippines – The thrift banking industry is exploring tighter rules on salary lending, including limiting longer repayment terms to loans taken out for emergencies, as lenders seek to prevent consumers from taking on unsustainable debt.
The proposal comes after the Bangko Sentral ng Pilipinas (BSP) extended the maximum repayment period for salary loans to seven years from the previous standard of three. While the industry supports the move, banks are now focused on ensuring that the longer repayment terms do not encourage excessive borrowing, Manuel Santiago Jr., chair of the Chamber of Thrift Banks, said.
READ: BSP extends salary loan repayment period to 7 years
Speaking to reporters, Santiago said lenders were considering a “key control” that would reserve the longer repayment period for borrowers seeking loans for emergencies. Under the proposal, loans used for routine expenses, such as tuition, may not qualify for the extended terms, while those intended to cover hospital bills, home repairs or vehicle repairs could.
