Data released yesterday by the Central Bank revealed that banks operating in the country reduced individual lending by 6.1 billion dirhams during the last April and May, at a time when it raised its funds for government projects by 9.2 billion dirhams, as well as investment in bonds by 26.8 billion dirhams.
Two bankers confirmed that some banks imposed more strict conditions, by reducing the ceiling of the personal loan to 15 times the salary for expatriates, after it was 20 times.
They told «Emirates Today» that confirming the creditworthiness of the customer and his ability to pay are among the responsibilities of risk management in banks, considering that the banks ’strictness is a healthy matter for the bank and the customer, because the financial and banking sector is the first blocking wall and it must remain strong to support the rest of the sectors.
Credit granted
In detail, data issued by the Central Bank revealed yesterday that the total of individual loans recorded at the end of last May 324.1 billion dirhams, compared to 330.2 billion dirhams at the end of March 2020, a decline of 6.1 billion dirhams, and a rate of "negative 1.8%" within two months.
The data also showed that the credit granted to government projects recorded 238.3 billion dirhams at the end of last May, compared to 229.1 billion dirhams at the end of March 2020, an increase of 9.2 billion dirhams.
During the same period, banks directed 26.8 billion dirhams to invest in bonds, bringing the balance of this item at the end of May to 255 billion dirhams, compared to 228.2 billion dirhams at the end of March 2020, a growth of 11.6%.
Risk departments
The banking expert, Sheikha Al-Ali, said that one of the responsibilities of risk departments in banks is to ensure the creditworthiness of the customer and his ability to pay.
She explained: “Given the implications of the emerging Corona Virus on jobs and jobs, the granting of new funds has been stopped at the same previous rate, and banks have tended to reduce the ceiling of the personal loan to 15 times the salary for expatriates instead of 20 times, in effect for years past, according to the central bank’s loan system Personal".
Al-Ali stressed that this is a healthy matter for the bank and the customer, especially in light of the current circumstances, pointing out that individual loans increase and decrease from period to period according to the market situation, and levels of demand, which in turn witnesses relative calm.
Funding preferences
For his part, banking expert Muhannad Awni said that in times of crisis, banks prefer financing government projects and related entities, as well as investments that are guaranteed returns, low risk and with good credit rating.
He added that there are entities and companies that have reduced the salaries of their employees, while a number of them have been dispensed, especially in sectors that are most affected by the repercussions of the pandemic "Coffed 19". Therefore, it is natural for banks to freeze granting funds for this category of dealers, and to wait until the activity is resumed. The economist and his previous pace.
He stressed that this approach is in place in all countries of the world, pointing out that the crisis affected all economies, and the financial and banking sector is the first blocking wall and it must remain strong to support the rest of the sectors.
Banks reduce the personal loan ceiling to 15 times the salary for expats, instead of 20 times.