Sunday, Apr 27, 2014
Dubai: Recent regulations on lending limits, mortgage regulations based on clearly defined loans to value ratios and the upcoming launch of a credit bureau will help healthy and sustainable growth in the retail banking business in the UAE, said Jaydeep Gupta, Head of Retail Clients UAE.
Once the credit bureau is launched it will bring transparency to the market that will bring about a certain amount of consolidation of indebtedness. Today, the UAE runs, per person close to $95,000 (Dh348,650) as indebtedness. Currently there is only limited control on indebtedness through the calculation of debt burden ratio (DBR).
With the launch of the credit bureau, the market will become fully transparent and one of the side effects of this in the short run will be that some people may not be able borrow any more to meet their multiple debt obligations.
Impairments
“In the short run this might lead to some amount of defaults resulting in a spike in loan impairments. But for the long term, it is absolutely the right thing to do. We have seen wherever credit bureaus have been introduced, banks and financial institutions have witnessed a spike in impairments but in cases where these institutions have been strong in analytics the impacts were minimised.”
The impact is not likely to be very big as most banks have gone through a period of deleveraging and balance sheet process over the last 4 to 5 year and have been cautious in risk assessment.
Gupta expects to see healthy growth in the mortgage business. “I personally think the mortgage business in the UAE has matured to a great extent and the new regulations have brought about some degree of stability in the market. We will also see the prices plateauing and not galloping as it happened in the last boom,” he said.
By Babu Das Augustine Deputy Business Editor
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