UAE central bank directs lenders to reconsider Emiratis’ loans

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Central Bank of the UAE Governor chairs the meeting of its board members. Photo - WAM

Lenders in the UAE have been directed by the country’s central bank to help reduce the debt burden of Emirati nationals. Some bankers are suggesting banks to write off certain personal loans.

The Board of Directors of Central Bank reviewed data on the personal loans (non-commercial) of UAE nationals and considered several options to find appropriate solutions for these loans. The review also found that the deduction of instalments from the monthly salaries of UAE nationals towards repayment of these loans (debt service) is rather high.

“To alleviate the financial burden on UAE nationals, the board instructed further study and more cooperation and coordination from concerned agencies in order to find solutions,” the statement said. It did not specify how the burden should be reduced.

The UAE government said in January it would settle AED2bn ($544.5m) of debt owed by nationals, including some who were detained for defaulting on loans.

UAE bankers, speaking on condition of anonymity, revealed banks would be writing off some debt related to personal loans.
“It must be about waiving or writing off some loans conditionally. We need to know more details,” said an Abu Dhabi-based banker involved in credit.

In the boom years, the UAE banks granted massive personal loans to Emiratis and expatriates. But after the financial downturn and real estate crash in the UAE, many lost jobs, finding it difficult to repay loans.

According to the central bank, personal loans in the UAE, which has one of the largest Arab banking sector, surged by at least 35% during 2006-08 before dropping over the past three years following the 2008 global financial crisis and regional debt default problems.

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