UAE borrowers get more time to pay

The Central Bank tweaks its regulation of consumer lending to allow heavily indebted Emiratis to defer loan repayments in certain circumstances.

Emiratis struggling to pay bank loans will be given more time to clear their debts, the Central Bank said. Ryan Carter / The National

Emiratis struggling to pay bank loans will be given more time to clear their debts.

If their monthly repayments exceed half their income, Emirati customers will be able to negotiate with banks to defer loan instalments beyond the maximum four-year limit.

"[This is] provided no fresh funds are made available to the borrower," the Central Bank said yesterday.

The move should help reduce the burden of debt payments on Nationals and reverses an earlier rule bankers said had become a burden for some customers. In May last year, the Central Bank implemented a raft of reforms aimed at reining in the lending free-for-all that fuelled a credit boom, including limiting loan repayments to a maximum of four years.

The Central Bank also imposed a limit that meant customers could not borrow if their repayments exceeded half their monthly income.

Prior to the new regulations, the average loan repayment among Nationals lasted between 11 and 13 years. The payments accounted for up to two-thirds of their salary, said Mohammed Zaqout, the head of Al Hilal Bank's personal banking group.

"From [Emiratis'] perspective, when this new circular came out and said you couldn't borrow any more, these people still had needs," he said.

"We had complaints saying it's Eid or Ramadan and they need to defer earlier instalments."

Regulations were also adjusted to allow borrowers to consider income earned from mortgaged properties when calculating their maximum monthly repayments.

Many Emirati customers had found themselves unable to borrow from banks they had dealt with for years, while lenders faced a barrage of complaints.

"People would start complaining about Central Bank regulations and people were complaining as they couldn't get new loans but the intention is to stop them getting into debt," a Central Bank official told the Emarat Al Youm newspaper in March.

The Federal National Council has also called for the Central Bank to lower interest and profit rates on loans and mortgages.

A Dh10 billion (US$2.72bn) fund for debt relief for Emiratis was established to mark National Day last year.

Funds have been disbursed twice this year, most recently in May to settle debts of Dh568m owed by about 368 citizens.

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