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2023-01-01

Instructions No. (6) of 2023 Regarding the Opening of a Temporary Overdraft Current Account for Public Sector Employee Borrowers

The Palestine Monetary Authority issued Instructions No. (6) of 2023 to regulate the opening of temporary overdraft current accounts for public sector employees facing irregular salary disbursements. The directives mandate licensed banks (excluding Islamic banks) to open these accounts to service overdue loan installments, cap annual declining interest at 3%, prohibit commissions, and require full settlement upon salary receipt, while allowing account closure upon employee request or bilateral repayment arrangements. Furthermore, the instructions require banks to classify the associated credit according to International Standard No. (9) risk methodologies and enforce compliance through penalties stipulated in the 2010 Banks Legislative Decree.

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[Palestine Monetary Authority Logo] Palestine Monetary Authority PALESTINE MONETARY AUTHORITY

Instructions No. (6) of 2023 Regarding the Opening of a Temporary Overdraft Current Account for Public Sector Employee Borrowers

Pursuant to the provisions of Legislative Decree No. (9) of 2010 concerning Banks, particularly Articles (40, 43, 72) thereof, and in accordance with the powers delegated to us, and in pursuit of the public interest, we have issued the following Instructions:

Article (1) Objective The provisions of these Instructions aim to regulate the granting of a temporary overdraft current account to public sector employees during periods of irregular salary disbursement.

Article (2) Scope of Application

  1. The provisions of these Instructions apply to banks licensed by the Palestine Monetary Authority to conduct banking business in Palestine.
  2. Islamic banks are exempt from the provisions of these Instructions.

Article (3) Temporary Overdraft Current Account

  1. Notwithstanding the provisions of Article (5) of Instructions No. (5) of 2023 concerning Market Discipline and Protection of Customer Rights, the bank must open a temporary overdraft current account for a public sector employee owing loan installments due to irregular salary disbursement, for the purpose of servicing the due installments in accordance with the provisions of these Instructions.
  2. The bank must notify the public sector employee of the opening of a temporary overdraft current account for them through appropriate channels within (30) thirty days from the date of account opening.
  3. The bank shall charge a declining interest on the outstanding temporary overdraft current account balance at a rate of (3%) maximum annually.
  4. The maximum limit of the temporary overdraft current account shall be the value of the unpaid due installments resulting from irregular salary disbursement.

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

[Palestine Monetary Authority Logo] Palestine Monetary Authority PALESTINE MONETARY AUTHORITY

  1. The bank is prohibited from charging any commission on the temporary overdraft account.
  2. Subject to the provisions of Article (2) paragraph (2) of Instructions No. (25) of 2021 concerning the handling of employee loan installments and financing, the bank must reduce the temporary overdraft balance or settle it in full upon receipt of the delayed salary portions.

Article (4) Exceptions Notwithstanding the provisions of Article (3) paragraph (1) of these Instructions, the bank must close the temporary overdraft current account for the employee in the following cases:

  1. Receipt of a written request from the employee stating their unwillingness to open a temporary overdraft current account.
  2. Existence of bilateral arrangements with the employee to settle their due installments.

Article (5) Credit Classification The bank must classify the credit granted to public sector employees according to inherent risk levels and the approved classification methodology in accordance with the requirements of International Standard No. (9).

Article (6) Penalties Anyone who violates the provisions of these Instructions shall be penalized in accordance with the provisions of Article (54) of Legislative Decree No. (9) of 2010 concerning Banks.

Article (7) Implementation and Enforcement All competent authorities shall implement the provisions of these Instructions, each within their respective jurisdiction, and they shall apply as of the date of their issuance. Issued in the city of Ramallah on 31/5/2023.

Dr. Firas Malham Governor [Signature]

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

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