Saudi central bank asks banks to reschedule property loans
The Saudi central bank asked local banks to reschedule consumer loans to help cash-strapped borrowers
Saudi Arabia’s central bank said on Tuesday it had asked local banks to reschedule the property loans of citizens whose incomes had been reduced by government austerity measures.
Last month, the government said it would cut allowances for employees in the public sector, where about two-thirds of Saudis work, to save money as low oil prices strain state finances.
Economists estimated the cuts might reduce the income of many people by about 20 percent, making it harder for them to service their property and consumer loans.
At the end of last month, the central bank asked local banks to reschedule consumer loans to help cash-strapped borrowers. It is now doing the same with real estate loans, transferring some of the pain of the austerity drive to banks from consumers.
Outstanding real estate loans extended by banks to retail customers totaled 108.2 billion riyals ($28.9 billion) at the end of June, central bank data show. Consumer loans, a different category of lending, were worth about three times that.
The central bank said on Tuesday that banks must offer all available rescheduling options to clients in a clear, understandable way and explain their financial impact.
Fixed interest rates on loans cannot be changed, variable rates must remain the same and banks cannot take extra fees when they reschedule loans, the central bank said.