Banks warned over buying individual debt

The Central Bank has warned banks against buying debt by individual clients of other banks in a bid to attract more customers, saying it would take severe measures against violating banks, including a government boycott.

A circular sent by Central Bank governor Sultan bin Nassir Al Suwaidi said such practices by some of the country’s 51 banks are only complicating government efforts to tackle the festering personal loan problem in the second largest Arab economy.

The Sharjah-based Arabic language daily Alkhaleej said the circular sent to the banks on Wednesday came after reports that some banks were luring customers from other banks by offering to reschedule their debt to those banks.

It said banks were offering loans to new customers with installments exceeding 50 per cent in violation of personal lending rules introduced by the Central Bank.

“The Central Bank has noticed that some banks are unusually attracting debtors to other banks and this will only aggravate the personal debt problem and obstruct government initiatives to tackle the problem,” Suwaidi said.

“Banks must stop this practice for three months with immediate effect…failing to do so will prompt the Central Bank to take severe measures against them..it will also push the government to stop dealing with them.”

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