UAE’s apex bank asks to increase provisions against troubled groups
The Central bank of UAE has asked all the local lending bodies to increase their provisions against loans for Ahmad Hamad Algosaibi and Brothers (Ahab) and Saad Group. It has said that the limit should be raised from 50 per cent to 80 per cent.
The demand for the same was sent in form of circular by the bank to the lenders. It has been done since the bank fears that the troubled group may be going for financial bankruptcy and that is why it has followed such a conservative approach towards it.
Both the Saudi groups are locked with each other in legal disputes and that has sent shock waves across whole of the financial sector. Besides it has also brought into question the practice of lending loans based only on the name and reputation of a person or company.
That is not all; the central bank has also directed banks and other institutions, both national and international, to make proper provisions for bad loans.
Since both the groups in question have already defaulted in paying loans worth billions, the banks were asked to make provisions for 50 per cent in 2009.
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