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2023-01-01

Instructions No. 6 of 2023 Regarding the Opening of a Temporary Overdraft Current Account for Borrowing Public Sector Employees (1)

The Palestine Monetary Authority issued Instructions No. 6 of 2023 to regulate the opening of temporary overdraft current accounts for public sector employees experiencing irregular salary disbursement. The mandate requires licensed banks (excluding Islamic banks) to establish these accounts within thirty days, cap annual reducing interest at 3%, and waive all associated fees while automatically settling balances upon salary receipt. Furthermore, the Instructions mandate specific credit classification under International Standard No. 9, outline exceptions for account closure based on employee requests or bilateral arrangements, and establish penalties for non-compliance effective from the issuance date.

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[Logo of Palestine Monetary Authority] Palestine Monetary Authority

Instructions No. (6) of 2023 Regarding the Opening of a Temporary Overdraft Current Account for Borrowing Public Sector Employees (1)

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. Contrary to 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 liable for loan installments due to irregular salary disbursement, in order to process the outstanding installments according to these Instructions.
  2. The bank must notify the public sector employee of the opening of a temporary overdraft current account through appropriate channels within (30) thirty days from the date of opening.
  3. The bank shall charge a reducing interest on the outstanding temporary overdraft current account balance at a maximum rate of (3%) annually.
  4. The maximum limit of the temporary overdraft current account shall be the value of outstanding unpaid 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

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

Article (4) Exceptions In exception to Article (3) paragraph (1) of these Instructions, the bank must close a temporary overdraft current account for an employee in the following cases:

  1. A written request from the employee stating their unwillingness to open a temporary overdraft current account.
  2. The existence of bilateral arrangements with the employee to settle the outstanding installments due from them.

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

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

Article (7) Implementation and Enforcement All competent authorities, each within their respective jurisdiction, shall implement the provisions of these Instructions, which apply as of the date of 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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