IslamicFinance.de

Saudi Arabia’s central bank has asked local banks to reschedule consumer loans after the government cut bonuses and other financial perks for public sector workers. The cabinet announced this week that it would slash ministers’ salaries by 20% and reduce a range of allowances for public employees. In addition, the government said it would base salary payments on the Western calendar rather than the Islamic calendar; since the latter is about 11 days shorter. This is expected to reduce income further. Banks are currently negotiating with the central bank to be allowed to deduct up to 40% of customers’ salary payments to service their consumer loans, instead of the 33% currently permitted. If the central bank declines, banks will discuss raising interest rates on the loans.