UAE mulls personal loan curbs

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LOAN CURBS: The UAE is concerned about the use of personal loans as leverage in property deals. (Getty Images)

The UAE central bank is considering new regulations to curb personal loans and bank lending to small businesses, according to banking industry sources.

“The central bank is concerned about the reports of use of leverage by individuals and small businesses in real estate transactions. There are talks of a tightening of regulations,” the retail banking head of a local lender told UAE daily Gulf News.

Under the existing rules, UAE nationals and expatriates can obtain a personal loan of up to 250,000 dirhams ($68,000) while UAE nationals can take out loans up to 2 million dirhams if they own a business.

According to data from the central bank, consumer loans have soared more than 55 percent since the end of 2006. Loans to individuals rose to 49 billion dirhams at the end of March, compared with 31 billion dirhams in December 2006.

Strong appreciation in real estate prices has encouraged the practice of using personal loans for real estate investments, according to a report by Al Mal Capital, a regional investment bank.

“There could be cases where individuals are over-leveraging. We support initiatives such as a credit bureau and finer regulations to curb such eventualities,” Yousuf Nasr, CEO of HSBC Bank Middle East, told the newspaper.

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READERS' COMMENTS

The banks should realise
Posted by Gemma, Dubai, UAE on Tuesday 4 November 2008 at 16:27 UAE time

The banks should realise that most people woudn't dream of taking a personal loan of that size ordinarily, but are shoe-horned into it because of the ridiculous 1-year in advance rental payments that landlords demand. When is something going to give? Now with the situation of the banks not lending, many people are forced into an impossible situation. This is a major shortfall of this city and will force many people to reconsider living and working here.

Personal Loans
Posted by Amyad, Dubai, UAE on Thursday 11 September 2008 at 14:14 UAE time


Banks operating in UAE needs to put their act together, no customer service exsist here in banks. It's as much as banks fault as any individual taking laons.

Banks charge way too high interest rate & lure you into offering loans & credit cards etc.

Why?
Posted by Troy Norris, Dubai, UAE on Thursday 21 August 2008 at 15:28 UAE time


With the increased cost of Rent in the UAE and paying 1 year in advance how can the Central Bank expect expats to cover this. Infarstucture needs to be put in place to offer residents monthly payments for rental. Not only are they paying their rent yearly they are also paying commission and interest on the loans for Rent. When will they come to world standards

Central Bank initiatives
Posted by api, London, UK on Sunday 10 August 2008 at 15:44 UAE time


This initiative is long overdue .... the Central Bank needs to be more agile in addressing the issues arising from inflation as it has no control on the setting of interest rates, thus the use of targeted strategies are vital.

I feel it may take more that than this to negate the effects of high inflation in the UAE

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