Saudi commercial banks are being required to bear much of the economic burden as the gov't cuts spending
Saudi Arabia's central bank is studying how commercial banks should reschedule housing mortgage loans after government austerity measures reduced many borrowers' incomes, a Saudi newspaper reported on Tuesday.
The report underlined how Saudi commercial banks are being required to bear much of the economic burden as the government cuts spending to curb a big budget deficit caused by low oil prices.
Last week the cabinet decided to reduce allowances for public sector employees. In response, the central bank issued instructions to banks on Sunday on how they should reschedule the consumer loans of customers whose incomes had shrunk.
Al-Riyadh newspaper, quoting unnamed sources at the central bank, said it was trying to achieve a balance between mortgage borrowers' financial situation and creditors' loan policies.
The newspaper added that the central bank felt the most important element of rescheduling should be that interest paid by borrowers should remain unchanged as a percentage of their incomes.
The central bank expects the rescheduling of mortgages to take longer than the process for consumer loans, it added. The central bank did not respond to a request for comment.
Outstanding real estate loans extended by banks to retail customers totalled 108.2 billion riyals ($28.9 billion) at the end of August, central bank data shows. Consumer loans, a different category of lending, were worth about three times that sum.