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2021-01-01

Instructions No. 25 of 2021 Regarding the Handling of Employee Loan Installments and Financing

The Palestine Monetary Authority issued Instructions No. 25 of 2021 to regulate how licensed banks handle employee loan and financing installments when salary payments are irregular due to force majeure. The directive mandates that banks cover the full monthly installment if the entire salary is transferred, or cover up to 50% of the installment if the employer withholds part of the salary, while capping total employee debt deductions at 50% of the transferred amount. Banks must apply these rules prospectively, charge salary transfer fees only once per month, and face penalties under Decision-Law No. 9 of 2010 for non-compliance, with exceptions allowed only for loans backed by additional income or legally verifiable employee consent.

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Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. 25 of 2021

Regarding the Handling of Employee Loan Installments and Financing

Based on the provisions of Decision-Law No. (9) of 2010 concerning Banks, particularly Articles 40 and 72 thereof, and after reviewing Instructions No. (2) of 2016 concerning Responsible Lending, and pursuant to the powers delegated to us, and in pursuit of the public interest, we have issued the following Instructions:

Article (1)

Objective and Scope of Application

  1. The provisions of these Instructions aim to regulate and guide the procedures for settling employee loan and financing installments in the event of irregular salary payments due to force majeure.
  2. The provisions of these Instructions apply to all banks licensed by the Palestine Monetary Authority to conduct banking business in Palestine.

Article (2)

Bank Obligations

The bank must adhere to the following:

  1. Pay the full monthly installment amount from the employee's account in accordance with Instructions No. (2) of 2016 concerning Responsible Lending, in the event of a full salary transfer.
  2. Pay a portion of the employee's due monthly installment not exceeding 50% of the amount transferred in the payroll statement, in the event that the employer fails to transfer the full salary.
  3. Ensure that the deduction rate on the employee, as a borrower and debtor from banks and specialized lending institutions, does not exceed 50% of the salary amount transferred.
  4. Pay the full due installments or a portion thereof upon receipt of delayed salary portions, in accordance with the provisions of paragraph (2) of this Article.

Article (3)

Exceptions

The following are exempt from the provisions of paragraph (2) of Article (2) of these Instructions:

  1. Loans granted based on the existence of an additional income source for the employee, in which case installment deductions must be adhered to according to the repayment schedule.
  2. Due installments that the borrowing employee agrees to pay in full, pursuant to a legally verifiable consent.

Article (4)

Fees

The salary transfer fee is charged only once, regardless of the number of salary payment installments received during the month.

Article (5)

Penalties

Anyone who violates the provisions of these Instructions shall be penalized in accordance with Article (54) of Decision-Law No. (9) of 2010 concerning Banks.

Article (6)

Implementation and Enforcement

All competent authorities shall implement the provisions of these Instructions within their respective jurisdictions, and they shall apply from the date of their issuance.

Issued in Ramallah on 28/11/2021

Firas Malham
Governor

Note:
www.pma.ps
Ramallah & Al-Bireh Governorate - Palestine P.O. Box 452
info@pma.ps | Fax: +970 2 2415310 | Tel: +970 2 2415251
Gaza - Palestine P.O. Box 4026
Fax: +970 8 2844487 | Tel: +970 8 2825713

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