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Pulling the cords
The UAE government is planning to introduce a unified lending system for all the banks across the country.
December 9, 2009 1:46 by Aarti Nagraj
The number of loan defaults has been particularly high since the global financial crisis hit the country last year. Banks like HSBC and Lloyds TSB introduced stricter criteria for lending to limit bad loans; HSBC increased its minimum salary requirement for a personal loan to AED20,000 a month, and Lloyds TSB stopped giving out mortgage loans for apartments in Dubai and reduced the amount it would lend for buying villas.
Moody’s Investors Services said in June this year that loan defaults in the country may increase up to four times the existing level because of the economic slowdown and redundancies.
On average, bank customers across the country are struggling to pay back AED2.50 for every AED100 that they borrowed, according to a report in The National. That rate could increase to 10 percent for personal loans and credit cards, the report said.
According to central bank data, loans and advances by UAE banks increased only by 2.8 percent during the first half of the year as compared to 16.6 percent during the same period in 2008.
On the other hand, provisions for bad loans at banks increased 28 percent during the first seven months of the year, to reach AED25.3 billion.
In September this year, Standard Chartered said that banks in the UAE will see defaults on credit cards, personal loans and home mortgages stabilize by the end of this year as job losses reduce.
“We should probably see some tailing off of some of the problems in the consumer book by the end of this year,” Shayne Nelson, the bank’s CEO for the Middle East and North Africa, said.
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