Kuwait banks demand net salary compliance for loans

• Kuwait banks will calculate the loan value based on the net salary, without including irregular allowances, especially those that the employee does not receive during leave as they are related to actual working hours.

• In banking terms, the value of the loan granted to the employee will decrease in the future by the equivalent amount of the net income, even if the total income remains unchanged.

• There will be no change from the banks in dealing with existing borrowers. Their monthly deductions are scheduled to continue without any increase, while the net salary mechanism is expected to be applied to new borrowers.

• The General Insurance Corporation has renewed its calls for all banks to provide special banking offers for retirees, including lending and attracting deposits.

While the Civil Service Commission recently acknowledged that the shift allowance related to the nature of the work “is not considered part of the salary, like other allowances such as the social allowance, specialization allowance, etc.,” loan officers in local banks opened an extensive discussion on this matter.

They concluded that compliance must be made when granting loans based on the client’s net salary, excluding any financial allowances he receives unless they are included in his net salary, even if they are listed on his salary certificate.

The sources indicated that banks were providing loans to Kuwaiti government employees based on their total salary, which includes all continuous and intermittent allowances they receive, such as nightlife allowance, food allowance, and value allowance.

In essence, this procedure means that the loan value will be calculated based on the net salary, without including irregular allowances, especially those that the employee does not receive during leave as they are related to actual working hours.

The sources indicated that the bureau recently decided to separate the allowances from the components of the net salary. This means, in banking terms, the value of the loan granted to the employee will decrease in the future by the equivalent amount of the net income, even if the total income remains unchanged.

Sources indicated that, following the Civil Service Commission procedure, the net salary of some employees in bank accounts will decrease by 10 to 20 percent, especially those with shift allowances, nighttime bonuses, food allowances, and other interrupted and unrelated bonuses. This reduction occurs because employees are not entitled to these allowances during vacations.

The sources pointed out that the bureau considered the continued disbursement of shift allowance related to the nature of work in line with the categories mentioned in the Civil Service Commission’s decision and its amendments regarding compensation for overtime assignment and the shift system.

This decision allowed the entity to specify numbers of employees to complete work and continue public services for citizens around the clock. Accordingly, bank officials will deduct these allowances from employee’s total salary, based on which the value of the loan is estimated.

Certainly, the banking discussion raised questions about how banks will handle employees who borrowed before the decision of the bureau to separate salary components. Specifically, those exposed to the scenario of having the regulatory-deducted deduction rate increase to a maximum of 40 percent of their salary after their net salary decreased.

Additionally, sources confirmed that there will be no change from the banks in dealing with existing borrowers. Their monthly deductions are scheduled to continue without any increase, while the net salary mechanism is expected to be applied to new borrowers.

Sources reported that banks are continuing to target newly appointed Kuwaiti employees or candidates for appointment with financing packages and distinctive offers. This effort aims to stimulate credit movement, which has faced widespread slowdown for a long time, resulting in a decline in credit growth rates to tangible levels.

Sources stated that new employees have become a major target for banks looking to expand their customer base. This trend is due to the growing slowdown in movement among individuals and companies, driven by the decline in the business environment in recent periods and the rise in interest rates to historical levels. Borrowing has become very expensive and selective based on the necessary need.

Sources stated that new employees have become a major target for banks looking to expand their customer base. This trend is due to the growing slowdown in movement among individuals and companies, driven by the decline in the business environment in recent periods and the rise in interest rates to historical levels. Borrowing has become very expensive and selective based on the necessary need.

On the other hand, the General Insurance Corporation has renewed its calls for all banks to provide special banking offers for retirees, including lending and attracting deposits. It noted that there is widespread interest among many credit policy officials in local banks in this segment, to the extent that they are willing to provide special financing offers for retirees. This is accompanied by the provision of several fee-free services and the possibility of granting retirees specific loans with zero interest up to 25 thousand dinars.

Central Bank of Kuwait allocates KD 240 million bonds and Tawarruq at 4.375% return

The Central Bank of Kuwait announced that it allocated the latest issuance of bonds and Tawarruq with a total value of KD 240 million for a period of three months, offering a return rate of 4.375 percent.