New loan system to be enforced on time

The new lending regulations capped personal loans at 20 times a borrower’s monthly salary and stipulated the loan must be repaid within 48 months. (AGENCIES)

New personal loan regulations approved early this year will be enforced on schedule on May 1, despite a delay in the preparation of the new loan form by the country’s banks, the Central Bank has said.
The Central Bank said it was still waiting to receive and endorse the new form which is to be prepared by the Emirates Bankers Association in coordination with the country’s 23 national banks and 28 foreign units.
“The delay in the preparation of this form will prevent us from enforcing the new personal loan system on time on May 1,” said Saif Al Shamsi, senior executive director at the Central Bank's treasury department.
“We are still waiting to see the new loan form which has to be approved by all banks,” he told the semi official daily Alittihad.
During a meeting last week, the Central Bank rejected a request by some banks to extend a May 1 deadline to enforce a new retail loan system.
“The Central Bank rejected a request to extend the deadline for the enforcement of the new personal loan rules and stuck to its May 1 deadline,” it said.
“But it promised to consider the banks’ request regarding fees on services extended by the banks to their major clients.”
The new lending regulations capped personal loans at 20 times a borrower’s monthly salary and stipulated the loan must be repaid within 48 months.
The regulations cover all retail loans including personal, car, housing loans and credit credits. They are intended to control lending activity and excessive charges by banks following public complaints about a surge in bank fees.
Personal loans in the UAE, which has the largest Arab banking sector, had surged by at least 35 per cent during 2006-2008 before they sharply slowed down over the past two years following the 2008 global fiscal crisis and regional debt default problems, according to the Central Bank.
From around Dh109 billion at the end of 2006, personal loans jumped by nearly 39 per cent to Dh148bn at the end of 2007 and by about 54 per cent to Dh228bn at the end of 2008.
Growth plunged to only around 3.9 per cent through 2009, when personal loans ended the year at 237bn.
In 2010, personal loan growth slowed down further to nearly 3.7 per cent as they stood at around Dh246bn at the end of the year.
 
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