Thrift banks seek tighter rules on salary loans
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.
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.
“We need to balance the purpose of where the six and seven-year loans are going to be applied,” he said. “We are very careful in making sure that the salary loan people are not overburdened.”
Under the revised regulations, banks and other BSP-supervised financial institutions are still required to determine the actual repayment period based on various factors, including employment records, repayment history, existing debt obligations and the borrower’s disposable income after debt payments.
The BSP also prohibited loan renewals or extensions without a reassessment of the borrower’s repayment capacity and continued creditworthiness. These will also not be allowed unless borrowers have settled unpaid interest and made actual payments that reduce their remaining loan balance.
Housing loans, motor vehicle loans and credit card loans are not covered by the amended rules even if repayments are made through salary deductions or similar arrangements.
In its 2025 report, the Financial Stability Coordination Council said retail loans expanded at an average annual rate of 15.7 percent between 2021 and 2025, with unsecured credit—driven largely by credit card borrowing and salary loans—surging 27.7 percent. Over the same period, household earnings that fuel consumption grew by just 5.8 percent.
The council noted that unsecured consumer debt has climbed to record levels and is growing faster than the broader economy, although household indebtedness in the Philippines remains below that of many of its Southeast Asian peers.
