Loan terms for expats may be tightened

June 12, 2014 - 2:27:58 am

DOHA: Amid reports of impending reforms in sponsorship law, banks here are gearing up to tighten lending conditions for expatriates. 

A top banker has revealed that banks have sought the approval of Qatar Central Bank (QCB) to tighten the conditions for dispensing personal loans to expatriates in a liberalised sponsorship and exit permit regime.

Discussions with the QCB are progressing, said the banker. Banks are urging the regulator to make it mandatory for expatriate loan-seekers to provide a Qatari’s guarantee. Alternatively, expatriate loan applicants may be asked to provide a guarantor who would undertake to repay 50 percent of a loan amount in the event of default. The guarantor could either be a Qatari or expatriate. 

Some banks have already begun insisting that expatriates applying for a loan furnish an undertaking from a Qatari guaranteeing repayment. Banking sector sources told Al Arab that further tightening of the lending conditions might lead to a serious fall in credit portfolios of the banking industry.

However, talking to the daily, Sheikh Fahad bin Fiasal Al Thani, Deputy Governor of the QCB, said banks cannot take individual decisions regarding the lending conditions. 

He said the Central Bank will come out with a clarification regarding the local banks’ concerns in a couple of days.

Sheikh Fahad added that some banks were taking ‘precautionary’ measures in terms of lending to their expatriate customers in view of reports of possible changes in the existing sponsorship and exit permit rules.

But it is too early for banks to change their policies, as the possible reform of sponsorship and exit permit rules were still under process.

“Each bank can have its own policies of risk management, but this should not be contradicted with the policy of the Central Bank and its policy guidelines”, Sheikh Fahad said.

Abdulla Saleh Al Raisi, CEO, Commercial Bank of Qatar, told the daily that local banks had indeed taken up the issue of lending to expatriates with the QCB.

The suggestions put forward by the banking sector also include the need to put a cap on the maximum loan period for expatriates based on their work contract.