Kuwait asks banks to curb lending

Kuwait City: Kuwait's central bank asked commercial lenders to lower the salary ceiling against which they lend to individuals to 30 per cent from 50 per cent, Al Watan said on Thursday, citing unidentified banking sources.

The newspaper did not give more details.

Kuwait is trying to control inflation through tighter lending restrictions, given that it has been lowering interest rates in line with the United States. The falling dollar is the largest constituent of the basket against which it values its dinar.

Inflation in Kuwait rose to a record 7.3 per cent in October.

Apart from worries about inflation, the Kuwaiti government has been trying to end an expensive nanny state tradition which has often led citizens to take large loans in the hope of debt writeoffs.

Negotiations

The central bank has been negotiating with local lenders for months on whether banks can contribute to efforts to slash citizens' debt by waiving some interest payments on loans where some lending rules were overridden.

The violations include requiring borrowers to make monthly payments exceeding half of their monthly wages and granting loans for terms longer than 15 years.

The head of the Kuwaiti banks' association, Abdul-Majid Al Shatti, said on Tuesday the talks with the central bank were still ongoing and no deal was in sight.

Kuwait set up a 300 million dinars ($1.1 billion) fund in December to help citizens pay their debt after parliament pressured the government to buy citizens' consumer debt estimated at $4 billion.