BSP readies revisions to rules on salary loan terms
The Bangko Sentral ng Pilipinas (BSP) has asked lenders to remove the repayment term limit for salary loans to give retail borrowers, including teachers, more flexibility in managing debt.
The central bank is seeking feedback from the industry on a draft circular that would revise rules on salary-based general-purpose consumption loans. Comments are due by April 20.
If approved, lenders could adjust repayment schedules based on a borrower’s creditworthiness rather than follow fixed limits. Current guidelines set a standard term of three years, extendable to five in special cases.
The BSP said repayment assessments should consider factors such as a borrower’s ability to pay, sources of income, repayment history and the purpose of the loan. The repayment period could also be set through mutual agreement between lender and borrower, provided prudent credit risk controls are in place.
Revised definition
The proposed amendments also clarify what qualifies as a salary-based general-purpose consumption loan, including credit for education, hospitalization, emergencies, travel, household or other personal needs. This is to differentiate these loans from other personal lending products, even if repayment is facilitated through salary deduction.
That said, the amended rules would not apply to credit card debt, motor vehicle loans or housing loans.
“Consistent with this objective, the revised regulations move away from a prescriptive prudential limit on loan tenor toward a principles‑based approach,” the BSP said.
The proposal was in response to growing calls for longer repayment terms for salary loans, especially from teachers.
In a Jan. 30 letter to BSP Governor Eli Remolona Jr., Education Secretary Sonny Angara sought guidance on whether there may be room to study, review or pilot more flexible loan structures for salary-based borrowers like teachers and education workers. INQ
The Department of Education (DepEd) has an Automatic Payroll Deduction System (APDS) that regulates salary deductions for teachers and staff, mainly to repay loans from accredited lending companies.
Angara also asked the BSP to explore alternative mechanisms that would allow longer repayment periods without undermining its mandate to promote financial stability.
He said the DepEd was ready to provide data and policy inputs to the central bank, noting that the financial well-being of teachers “is closely linked to their capacity to deliver quality education.”
Latest data from the BSP showed the outstanding salary-based loans from big banks rose 5.6 percent year-on-year to P167 billion as of February.
