Retirees facing nationality change could see credit limits restructured, say banks
Kuwait’s banking sector is preparing to address the impact of nationality changes on retirees who had Kuwaiti citizenship before losing it, including wives of Kuwaitis affected under Article 8 and former Kuwaitis who were granted nationality ubder Article 5 ‘distinguished deeds’.
This comes as the Public Institution for Social Security (PIFSS) develops a mechanism to disburse retirement entitlements for this segment of retirees.
Local banks are examining how to manage credit limits for borrowing clients in this category. Traditionally, Kuwaiti clients could access up to KD 95,000 in consolidated personal financing, divided into a consumer loan of KD 25,000 and a housing loan of KD 70,000.
Non-Kuwaitis, however, are not entitled to the same maximum limits. Moreover, retirees who lose Kuwaiti nationality before retirement are generally ineligible for pension benefits.
Sources told Al-Rai that banks are considering adjusting debt limits for these clients. Under this approach, a retired client whose nationality changes could see their existing credit limit reduced to match the maximum allowed for their new residency status.
For example, if a client held a KD 70,000 housing loan as a Kuwaiti but becomes non-Kuwaiti before retirement, the bank could reduce the limit to KD 50,000.
The difference of KD 20,000 would then be deducted from the Social Security benefits deposited into the client’s account once the new mechanism is in place.
From an accounting point of view, this reduction would be classified as “early repayment”, lowering debt interest while keeping scheduled installments aligned with the new debt value and repayment period.
Legally, banks justify this adjustment due to a change in a fundamental condition of the financing contract—nationality.
The end-of-service bonus, whether from the Social Security Institution or private sector employers, often serves as a guarantee for loan repayment, particularly for non-Kuwaitis.
Banks may continue to deduct portions of this bonus until the client demonstrates equivalent income in their current employment.
This proactive planning by banks reflects a broader effort to balance regulatory compliance, financial prudence, and customer entitlements in light of recent nationality-related policy changes.
