CBK seeks to avert commodities price rise after new lending rules

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CBK Deputy Governor Yousef Al-Obaid addresses the special meeting with the Ministry of Commerce and Industry and the banking sector

KUWAIT CITY, Nov 11, (KUNA): The Central Bank of Kuwait has addressed the Ministry of Commerce and Industry notifying it of new lending regulations to avert unjustified rise of prices of commodities and services.

CBK Deputy Governor Yousef Al- Obaid said in a statement to KUNA on Sunday that the central bank dedicates special concern for consumption and installment loans because they affect a large segment of people.

These loans also concern key economic sectors, namely banks, funding and investment companies, thus it is necessary to review these guidelines and regulations in light of the change in the macroeconomic indices.

The CBK new instructions have been issued, taking into consideration several factors such as the need to abstain from boosting consumption tendencies among the borrowing citizens, encouraging them to save and invest in safe sectors, Al-Obaid said.

Explaining further, he says that borrowers’ monthly repayment installment must not exceed 40 percent of the payment for employees and 30 percent for retirees, therefore, only those of high salaries will benefit from the loans’ rise.

For his part, Waleed Al-Awadhi, CBK’s Executive Director of the Supervision Sector, affirms that the new guidelines are partly aimed at safeguarding clients’ rights and sparing them heavy financial liabilities.

Average monthly payments for Kuwaitis increased by 12 percent between 2004 and 2017, but infl ation grew during the same period by 67 percent, whereby a commodity that valued KD 15,000 (approx. $5,000) in 2004 was priced at more than KD 25,000 (approx. $8,000) in 2017, he explained. Consumer loan can be higher by 25 times than the client’s monthly payment, with a maximum ceiling of KD 25,000 ($82,000) to be repaid in five years.

Maximum ceiling of the housing loan is KD 70,000 ($231,000), repayable in 15 years. Money is to be disbursed for renovation, construction, purchase of a private house.

The CBK has surveyed data of 739,450 clients, including 429,000 borrowers. Average consumer loan amounted to KD 36,000 (approx. $11,000). Average monthly payment was estimated at KD 1,100 (approx. $3,000).

The loan portfolio in Kuwait grew by 14 percent – from KD 1 billion in the year 2000 to KD 12 billion in the year 2017. The CBK recently introduced lending regulations are to be effective as of Wednesday.

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