Bahrain rolls out loan relief and liquidity boost to support economy

Dubai: Bahrain has moved to cushion households and businesses with a broad package of loan relief and liquidity support, aiming to keep credit flowing and ease repayment pressure during a period of economic strain.

The Central Bank of Bahrain said retail banks and financing companies will offer customers the option to defer loan installments and credit card payments, covering both principal and interest, for a period of three months. The relief applies to individuals and corporates, giving borrowers temporary breathing space at a time when cash flow pressures remain elevated.

Authorities framed the measures within a wider effort to support financial stability and sustain economic activity across sectors.

Loan relief extended across sectors

Banks have also been granted flexibility in how they treat affected loans during the deferral period. The move allows lenders to delay classification changes for customers who opt into the scheme, helping avoid an immediate rise in non-performing exposures across balance sheets.

The scale of the domestic loan book highlights the reach of the programme, with total lending in Bahrain standing at around BHD11.3 billion. The relief therefore touches a significant portion of the economy, spanning retail borrowers, small businesses and larger corporates.

Liquidity support expanded

Alongside the repayment relief, the central bank has introduced a series of funding measures designed to ensure that banks have sufficient liquidity to continue lending.

For six months, retail banks will have access to unlimited Bahraini dinar liquidity against eligible collateral, with the current level of available collateral estimated at BHD7.0 billion. The repo facility has also been extended to three months, giving lenders more flexibility in managing short-term funding needs.

Reserve requirements have been reduced from 5.0% to 3.5%, while key liquidity ratios have been eased. The minimum Liquidity Coverage Ratio and Net Stable Funding Ratio have both been lowered from 100% to 80%, freeing up additional funds that can be directed into the real economy.

Stability remains intact

The central bank said Bahrain’s financial system continues to operate on a stable footing, with banks maintaining strong capital adequacy and liquidity buffers despite the current environment.

Central Bank of Bahrain said they will continue to monitor developments closely and remain ready to introduce further measures if needed, with the focus on safeguarding monetary stability and ensuring uninterrupted access to financial services.