Banks permit loan restructuring, increase tax deduction ceiling to 50% for current debtors.
The Lowdown on Kuwait's Banking Shake-up
In a move aimed at lending a helping hand to struggling borrowers, the Central Bank of Kuwait (CBK) has given the green light to banks and financing companies to restructure existing personal loans - be it for consumer or housing purposes.
As part of this overhaul, the cap on monthly installment deductions from employed borrowers' salaries has been elevated from 40% to 50%, granting borrowers the opportunity to decrease their monthly payments in exchange for a prolonged repayment period. This adjustment will especially benefit those whose wages have taken a hit but still find themselves overwhelmed by their loan obligations.
The restructuring alternative is open only to existing borrowers who've experienced a financial flip-flop - such as a reduced paycheck - that forces their installment-to-salary ratio beyond the previously established limit. Regretfully, this respite will not extend to fresh loan candidates.
The CBK has moreover allowed financing providers to stretch the loan term past the present-day regulations' specified limits, based on the borrower's request. This initiative is intended to lessen financial strain while keeping regulatory control on track, with the stipulation that the monthly deductions from a borrower's salary would not exceed the new 50% limit.
With these changes, the CBK is seeking to shore up financial stability and alleviate the weight on customers grappling with job or income changes without compromising the wellbeing of the banking sector.
On the Horizon:
- Under the revised framework, banks will now have the freedom to restructure existing personal loan contracts, rendering payment terms more workable for borrowers[1][2].
- The CBK has hiked the maximum deduction limit from a borrower's salary to 50% for existing borrowers. This change allows for a more substantial percentage of their monthly income to go towards loan repayments, streamlining the loan restructuring or credit agreement process[1][2].
In the revised framework, banks and financing companies can restructure existing personal loans, making payment terms more manageable for borrowers (be it consumer or housing loans). With the increased maximum deduction limit from a borrower's salary to 50%, they now have a more significant percentage of their monthly income to allocate towards loan repayments, streamlining loan restructuring or credit agreement processes.
