Loan installment delay in play

CBK expects growth this year

KUWAIT CITY, April 5, (Agencies): Finance officials in local banks have opened intensive communication lines with the Central Bank of Kuwait (CBK) seeking answers to many questions; foremost of which is if the postponement of the collection of installments for loans starts in April or next month, in addition to the mechanism for sorting clients who want to postpone payments, reports Al-Rai daily quoting sources from the banking sector.

Sources affirmed that banks “continue to deduct loan installments until the law on postponement is published in the official gazette and they are working towards activation of the service to automatically determine who among the clients want postponement or not by contacting the customer service centers.”

So far, the law covers about 500,000 customers; assuming everyone wants to postpone installments. Official data show that the total value of the personal loan portfolio, including consumer and installment loans, is about KD 17.248 billion as at the end of January. If the expatriates and Bedouns whose number is estimated at 15 percent of the total number of borrowers are excluded, the total amount of citizens’ loans is estimated at KD 14.5 million.

In a related development, banks have yet to specify their position on the installments of retirees whose salaries are transferred to the latter’s accounts every 10th day of the month. Here lies the problem as the installments will be deducted automatically from the retirees’ accounts if the law is not published in the official gazette before the 10th of the month. There are growing concerns among banks that the law will be published in the official gazette at a later date and then the collection of installments will be postponed starting with the April salary. However, for retirees, the banks will then have to return the installments deducted from the accounts of retirees; otherwise, they have to work with two time dimensions to start postponing installments, which contravenes the law stating the period for the start and end of its implementation.

The Kuwait Central Bank Governor Dr Mohammad Al-Hashel expects the country to witness “positive growth” during 2021, but conceded it will “take time” to return to prepandemic levels.

“Encouragingly, early monetary, prudential and fiscal policy interventions since the outbreak of the pandemic have ensured that the country’s productive capacity remains broadly unscathed, offering hopes of a swift recovery once the pandemic is brought under control,” he told The Banker in an interview.

In spite of the economy being hampered due to lockdowns and the recent drop in oil prices, particularly in the first half of 2020, the government-led inoculation campaign, currently underway, has “improved public sentiment and brightened economic prospects,” Al-Hashel added.

On the domestic scale, contact-intensive businesses have been “adapting,” he said. This is demonstrated in the rise of online sales, restaurants being an example.

The recovery in oil prices, reaching their highest levels in more than a year, also bodes well for Kuwait’s oil and non-oil gross domestic product growth, he mentioned.

In regards to monetary policy measures taken to face the crisis, cbk carried out a “range of support measures,” namely slashing its policy rate by a cumulative 1.25 percent during March 2020, from 2.75 percent to 1.5 percent.

“That move alone saw our interest rates falling to record lows, which significantly eased funding conditions and the debt servicing burden for borrowers of all types,” he said.

CBK also “partially relaxed a range of prudential regulations to ease any potential liquidity constraints and to enable banks to continue playing their role as financial intermediaries.”