Central Bank of Kuwait expects large turnout for consumer, installment loans

New low interest rate set at 1.5%

  

KUWAIT CITY: The Central Bank of Kuwait has directed all local banks to start receiving financial transactions related to individual consumer loans, installments, and credit cards via electronic platforms and tele-banking from Sunday.

The decision came after most of the banking operations had been suspended for more than two months due to the outbreak of novel coronavirus (COVID-19) pandemic that has rendered inactive almost the entire business sector in the country.

The same sources told the daily that banks have started receiving transactions according to the new discount rate set at 1.5 percent by the Central Bank of Kuwait, and expecting a large turnout of customers for the consumer and installment loans due to the low interest rate offered. They also stated the return of individual financing indicates a gradual return to normal life in the coming period due to the fact that loans are linked to a wide segment of citizens and expatriates and they’re relatively important in the lending and financing portfolios of local banks and financing companies.

According to the latest data published on the Central Bank of Kuwait’s website, consumer loans provided to the customer for the purpose of financing the purchase of personal needs and durable goods or education or medical treatment expenses, and paid in monthly installments during a period not exceeding five years, stood at KD 1.49 billion by the end of last February.

As for the simplified loans, they are long-term personal loans granted to citizens to restore or buy private housing, and they are paid in monthly installments during a period not exceeding 15 years. Currently, simplified loans have reached KD 11.98 billion.

Meanwhile, in light of the various accelerated regulatory laws in support of the banks in facing the repercussions of the coronavirus crisis, the Central Bank holds extensive meetings with bank officials on more than one file, including the reassessment of major debt positions, the daily added.

It said the Central Bank has asked each bank to determine the level of cash flow and profitability , the future value of their guarantees and the extent of their ability to pay obligations on time if they were exposed to a set of difficult scenarios.

It should be with an explanation of whether any of them had already submitted to its bank requesting the deferment of debt installments or reschedule due to the consequences of the coronavirus. The banks had previously decided to postpone the installments of loans for individuals, small and medium-sized companies and establishments affected by “corona” for six months since last March until next September, without any penalties or late fines, relieving the pressure of repayment on all customers.

Based on the study prepared by the Higher Steering Committee for Economic Stimulus, headed by the Central Bank Governor Dr Muhammad Al-Hashel, it’s expected that revenues of the affected sectors in Kuwait will decrease by 15 to 30 percent, under the scenarios of the closure for a period of 8 to 12 weeks, since the start of the government closure, with varying impacts for each sector, it noted. It reiterated the rate of decline in global economic activity in the second quarter of 2020 is likely to be the most severe since the Second World War.

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