Central Bank urged to curb offer of easy personal loans :: Gulf News

The Central Bank should curb the phenomenon of easy personal loans offered by banks in the emirate, the National Consultative Council said yesterday.

The Central Bank will be like the man pushing on a string until the Rulers' Courts stop paying off the bad debts nationals have with banks. The National Consultative Council might want to ask that that practice halt. Otherwise banks have every incentive to loan to a national regardless of his or her credit worthiness.

Speaking of credit worthiness, that's pretty difficult to check - there are no credit bureaus in the UAE where borrowers credit histories are kept. There's not been a demand for a credit bureau and there won't be as long as the personal debts of nationals, or certain nationals, are always taken care of by someone. If you want to curb spendthrift borrowing you have to shift the obligation to repay onto - novel idea coming - the borrower and - novel idea coming - leave it up to the lender to collect from the borrower and from someone else. Otherwise the bank and the borrower have no reason to care.

The National Consultative Council

also suggested the Central Bank should hold a bank responsible for a default because of bad assessment when offering the loan, and the transfer of a person's salary to banks to repay a loan should not be made mandatory.

They also called for a new regulation to control personal loans by fixing a ceiling for the interest rate charged for transactions between banks, and cancelling the provision of a cheque as a guarantee in offering a loan.

According to Abu Dhabi Police General Headquarters, 1,748 UAE nationals were reported defaulters from 1999 to 2004 with a total Dh2.727 billion in credits. Regarding bounced cheques, the council was told 35,418 cases involving Dh1.14 billion, had been registered with Abu Dhabi Police between 2002 to 2004.

But an interest ceiling on loans only encourages borrowers to borrow more. Is that what you want?