Central Bank of Bahrain decides to stop bank loan deferrals

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Bahrain - Bank loan instalments will not be deferred beyond June 30, the Central Bank of Bahrain (CBB) has announced.

MPs were quick to voice their concerns over the move and have urged the Cabinet to urgently intervene to overturn the decision.

The CBB has gone with the recommendations of the Bahrain Association of Banks, it said in a circular signed by CBB Deputy Governor Shaikh Salman bin Isa Al Khalifa and directed to all retail banks.

“The CBB notes and agrees to the recommendation of the Bahrain Association of Banks to discontinue the instalments deferral programme by June 30, 2022,” said the circular yesterday.

“The CBB continues to urge all licensees, to whom this circular is addressed, to assess customers’ needs for either rescheduling or restructuring existing facilities.“We take this opportunity to reiterate our appreciation for your co-operation and assistance during the last two years.“Should you have any questions on the above requirements, please do not hesitate to contact your supervisory point of contact at the CBB.”

In April, Parliament unanimously approved a proposal to defer all bank loan instalments until the end of the year for Bahrainis and local businesses and referred it to the Cabinet.

Loans were initially deferred in 2020, from March until August, without bank charges. They were deferred four more times under optional deals in which interest was calculated from August 2020 until June this year.

Twenty legislators, led by Bahrainisation Committee chairman Ebrahim Al Nefaei, hope the government will consider stepping in with many family budgets set to face a triple whammy in the weeks to come.

“Eid Al Adha is just days away, followed by back-to-school purchases and Ashoora – all involving heavy spending, but it seems that our markets will be hit hard this time round,” said Mr Al Nefaei.“What is more important – people unable to meet their financial commitments due to the damage caused by Covid-19 and risking time in jail, or some recommendation by already rich banks?“A lot of people have called saying that if this goes ahead they will not be able to go out during Eid Al Adha because their basic bills will drain all their monthly wages.“A reschedule, or a restructure, of loans is an option that could be explored after a further six months extension, until the end of this year, but not now when everyone needs all the fils they can lay their hands on.”MPs in April also unanimously approved extending bank loan instalments for up to 15 years to help people cope with a return of monthly deductions. They want to more than double the maximum years of repayment from seven to 15.

Loans and credit facilities rose 5.7 per cent in Bahrain to BD11.3 billion ($30.05bn) as of end-May 2022 when compared with the level as of end-May 2021, signalling a rise in economic activity, the GDN reported on Monday.

The business sector accounted for 46.2pc total outstanding credit while the proportion of personal loans was 49.5pc.

A statement by the CBB, after its board of directors met on Sunday, said key indicators are consistent with the return of activity to all economic sectors in the kingdom and demonstrate the financial sector’s stability and capacity to serve the national economy.