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Fri 17 Aug 2012 09:48 AM

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UAE banks to extend loan maturities for nationals

Central bank says maturities on some personal loans to Emiratis should be lengthened

UAE banks to extend loan maturities for nationals
UAE Central Bank governor Sultan Nasser Al Suwaidi

The UAE's central bank has told lenders to extend maturities on certain personal loans held by UAE citizens by more than four years, the latest initiative aimed at reducing their debt burdens.

In a circular sent to banks earlier this week, the regulator told banks to reschedule citizens' loans by more than 48 months if the repayment exceeds 50 percent of gross salary and other income.

The loans can be rescheduled provided no fresh money is borrowed, the circular added.

Banks were also told to segregate personal loans used to buy real estate, with the borrower's consent, and set them up as separate loans. Payments on those should also not exceed 50 percent of the total salary.

The UAE has taken a raft of steps to help citizens carrying high debt burdens. In May, it announced plans to settle defaulted loans owed by its citizens - up to $1.36m each - after a presidential decree, in the second such move this year.

UAE citizens took out massive personal loans during the boom years between 2003 to 2008 but found themselves struggling to repay debt after the global financial crisis and property downturn across much of the country.

The central bank has brought in new regulations on personal lending by banks in the UAE, fuelled by concerns over the debts individuals were taking on.

In May 2011, the central bank capped personal borrowing at 20-times an individual's monthly salary, with monthly repayments also capped at 50 percent of an individual's salary and regular income. Personal loans could have a maximum tenor of four years.

This year, it also capped the interest rate banks charge on credit cards at 18 percent annually. Banks in the UAE previously charged between 27 percent and 36 percent a year, much higher than many other Gulf Arab states.

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Red Snappa 7 years ago

Now that's what I call a good deal, far fewer bouncing guarantee cheques, plus an Emirati cannot be made redundant or put out of work once in it.

Don't suppose that gesture will ever extend to long-term expatriate residents.

Business Man 7 years ago

They have to be shielded from economic realty at all costs! The next generation will grow up completely state dependent.