Six-month deferral on instalments

TDT | Manama

Bahrain’s top bank yesterday deployed further regulatory measures and relaxations to cushion the pain inflicted by the coronavirus (COVID-19) on the local economy.

The Central Bank said, in a circular dated yesterday, the new measures, effective immediately, is valid for a period of six months. As per the circular seen by Tribune, retail banks, financing companies and microfinance companies must now offer a sixmonth deferral on instalments for borrowers impacted by the coronavirus outbreak.

The top bank said the deferrals must be offered at no fees, no interest on interest and no increase in the rate unless the borrower agrees for a shorter period. The move also applies to credit cardholders impacted by the outbreak.

Concessionary repo

CBB is also providing retail banks concessionary repo arrangement of up to 6 months at zero per cent on a case by case basis. Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.

Reduces cash reserve ratio

Cash reserve ratio for retail banks is reduced from 5pc to 3pc, which means that the banks now have more money to play. The CBB also reduced Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) limits for all locally incorporated banks from 100 per cent to 80pc. Risk weight for capital adequacy purposes for Bahrain based SMEs is reduced from 75pc to 25pc.

 CBB directed retail banks and financing companies to relax their Loan-to-value (LTV) ration for residential mortgages for Bahrainis. The bank also increased the limit of Near field communication(NFC) - contactless without PIN transaction limit -to BD50. 

Debit card fee capped at 0.8pc

Merchant fees imposed by local acquirers on debit card transactions are now capped at 0.8pc. CBB said: “0.35pc of such fees will go to the acquirer, 0.25pc to the issuer and 0.2pc to the benefiting company.”

Yesterday’s move immediately follows CBB cutting its key policy interest rates on one-week deposit facility from 1.75 per cent to 1.00pc. The bank also cut its overnight deposit rate from 1.50pc to 0.75pc, one-month deposit rate from 2.20pc to 1.45pc, and lending rate from 2.45pc to 1.70pc.

Following the move, also third this month, CBB said the effort is “to ensure monetary and financial stability, as well as the smooth functioning of the money markets and economic activity in Bahrain.”

The Central Bank in a similar directive earlier banned lenders from freezing accounts of customers who have either lost their jobs or retired from employment even if the customer has a credit facility such as a local or credit card with the lender.

“The CBB issued a directive dated March 8, 2020, prohibiting such practice by retail banks, regardless of whether or not contractually the bank has the right to take such action,” according to a statement posted by the CBB on its website. The top bank said the directive ensures “sound and fair banking practices” by considering the best interests of customers.

In similar moves, the central banks of Saudi Arabia, the United Arab Emirates and Qatar have offered a total $60 billion in stimulus to ease the impact of coronavirus, while governments have cut property transaction and utility fees to help the private sector.