Singapore  - Singapore is slashing interest rates by more than a full point and increasing its share of insurance premiums on officially approved business loans, news reports said Wednesday.

The rate cut of 1.25 per cent and increased coverage of loan insurance to 90 per cent from 50 per cent will be effective as of effective as of January 1, 2009, officials said.

The Senior Minister of State for Trade and Industry, S Iswaran said the aim was to lower the cost of credit as part of an overall package to address the financing needs of the business community.

Last month, the government pledged 2.3 billion Singapore dollars (1.6 billion US dollars) worth of extra credit to help local businesses during the economic downturn.

Both the new loans and existing loans would be based on the new lower rates for the tenure of the loans, the Straits Times newspaper reported.

Borrowing has been tough for some businesses, with the transport, storage and communication industries recording a 19.8-per-cent drop in loans granted in November from a month earlier. (dpa)