Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (02) of 2024

Regarding Granting Overdraft Limits to Borrowing Public Sector Employees

Based on the provisions of Law Decree No. (9) of 2010 concerning Banks, particularly Articles (40, 43, 46, 72) thereof,

After reviewing the provisions of Instructions No. (25) of 2021 concerning dealing with employee loan and financing installments,

And the provisions of Instructions No. (02) of 2018 concerning requirements and guidelines for implementing International Financial Reporting Standard No. (09), and Instructions No. (13) of 2023 concerning dealing with liquidity shortage in the national economy,

According to the authorities vested in us,

And in the public interest,

We have issued the following Instructions:

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Article (1)

Objective and Scope of Application

1. The provisions of these Instructions aim to:

   a. Regulate the process of rescheduling or restructuring existing facilities and financing for public sector employees under the current exceptional circumstances.

   b. Regulate the Palestine Monetary Authority's decision to grant an overdraft limit to borrowing public sector employees.

2. The provisions of these Instructions apply to all banks licensed by the Palestine Monetary Authority to conduct banking business in Palestine.

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Article (2)

Rescheduling or Restructuring Public Sector Employee Facilities

1. The bank must launch a campaign to reschedule or restructure facilities for borrowing public sector employees according to the following:

   a. Reschedule or restructure existing facilities, unify them, and reduce installment values so that the installment value does not exceed 40% of the net salary.

   b. Positively deal with employees who previously obtained loans and financing based on another income source by rescheduling or restructuring their loans and facilities and determining their installment values based on the repayment source.

   c. Avoid including employees who receive their full salary in the campaign.

   d. Do not increase interest rates/yields on new contracts (rescheduling or restructuring contracts) and do not collect any additional fees or commissions.

2. The bank is committed to ensuring contact with all employees except those receiving their full salary by contacting them via SMS, as well as through media campaigns and inviting them to submit applications to reschedule their facilities.

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Article (3)

Granting Overdraft Limit to Borrowing Public Sector Employee

1. The bank must, in implementation of the Palestine Monetary Authority's decision, grant the borrowing public sector employee an overdraft limit in a separate account according to the following conditions:

   a. The overdraft limit must be equal to the sum of monthly installments from the beginning of 2024 until the end of August 2024.

   b. The overdraft limit must be used exclusively for the following purposes:

   1. Repaying the existing temporary overdraft balance granted to the borrowing public sector employee on the installment due date.

   2. Repaying installments due until the end of August 2024.

   c. The following categories are exempt from the provisions of Paragraph (1) of this Article:

   1. The employee whose paid salary percentage has reached 90% or higher.

   2. The borrowing public sector employee who has obtained a joint loan.

   3. Public sector employees whose installments were deferred until the end of April 2024 according to the provisions of Instructions No. (12) concerning the continuity of the national economy's financial cycle and its amendments.

2. The bank must inform the borrowing public sector employee of the granting of the overdraft limit according to the conditions stipulated in Paragraph (1) of this Article within a maximum period of (10) working days.

3. The bank must declare the overdraft account within the credit information database data at the Palestine Monetary Authority.

4. The Palestine Monetary Authority may extend the due period for the overdraft limit and the Murabaha financing limit at the Islamic Bank as it deems appropriate.

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Article (4)

Pricing of Overdraft Account

1. The bank may collect interest or yield on the utilized balance from the overdraft limit or Murabaha hedging according to the following:

   a. The maximum interest rate or yield on the utilized balance is the contractual interest rate or yield recorded in the loan contract, minus 2%, and in all cases, the interest rate or yield must not exceed the Three Month SOFR minus 1% (Three Month SOFR -1).

   b. The bank is prohibited from collecting any additional interest, yields, commissions, or fees on the overdraft limit or Murabaha hedging.

2. The bank may take necessary hedging measures to avoid the impact of the discount rates stipulated in this Article on financial statements.

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Article (5)

Procedures for Dealing with Employees Borrowing from Islamic Banks

1. The Islamic bank must grant the public sector employee who obtained Murabaha financing facilities a limit equal to the sum of monthly installments until the end of August 2024.

2. The provisions of Articles No. (3, 4, 6, 7, and 8) of these Instructions regarding the conditions for granting the employee a Murabaha limit shall apply.

3. The Islamic bank must extend the grace period for customers who obtained financing in the Ijara ending with ownership format or distribute it over the remaining financing life at the same compounded yield agreed upon with the customer according to the signed contracts, allowing for exceeding the periods specified in the Instructions.

4. The Islamic bank must reschedule financing for the public sector employee to reduce the debt burden using the Tawarruq format with prior approval from the Palestine Monetary Authority.

5. The Islamic bank must document Murabaha contracts in accordance with the law and the procedures and principles of sound Islamic banking operations.

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Article (6)

Objection

1. The borrowing public sector employee entitled to be granted an overdraft limit as stipulated in these Instructions may object, and in this case, the bank must adhere to the following:

   a. Accept the employee's objection, whether through online banking from the public service center, through bank branches, or through any other means provided by the bank to its customers.

   b. The bank continues to accept objections from employees until the end of April 2024.

2. The bank must adhere to the following procedures upon receiving an objection from the employee:

   a. Request the employee to reschedule their loan in accordance with their repayment capacity.

   b. Request the employee to sign a form authorizing the deduction from payments transferred from the salary to repay the due installments.

   c. Cancel the overdraft limit for the employee and cancel any interest accrued on it.

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Article (7)

Repayment of Overdraft Limit

1. The bank must repay the overdraft account limit according to the following procedures:

   a. Agree with the customer on the mechanism for repaying the utilized overdraft balance.

   b. Partial and proportional repayment in case the employee receives any payments exceeding 80% of their salary, or receives portions of arrears.

   c. In case the employee objects to being granted an overdraft limit, and an agreement is reached with the bank on a mechanism for repaying installments.

   d. In case the employee reschedules their loans and facilities at the bank under a new loan or financing, the overdraft limit is canceled and the existing balance is included in the rescheduling or restructuring process.

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Article (8)

Use of Overdraft

1. The overdraft account must not be used in case the employee receives salary payments exceeding 90% of their salary.

2. The overdraft limit is canceled in case the employee reschedules their existing facilities with the bank.

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Article (9)

General Provisions

1. The bank may apply these Instructions to other employees working in institutions whose operations were affected due to the current circumstances.

2. The granting of an overdraft limit or Murabaha financing limit to other employees requires that they have dues owed to them by the employer, and the employer's commitment to transfer the dues to the bank.

3. The bank must stop granting loans or financing to the borrowing public sector employee based on another income source other than their public salary, unless the repayment source is from that other income.

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Article (10)

Repeal of Conflicting Provisions

Everything conflicting with the provisions of these Instructions is repealed.

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Article (11)

Entry into Force

The provisions of these Instructions enter into force from the date of their issuance, and all competent authorities must adhere to what is contained therein, each within their respective jurisdiction.

Issued in Ramallah, on the date: 04/03/2024 AD

Dr. Firas Malham Governor

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Note: Ramallah & Al-Bireh Governorate - Palestine P.O. Box 452 محافظة رام الله والبيرة - فلسطين ص.ب info@pma.ps | Fax: +970 2 2415310 | Tel: +970 2 2415251 | Postal code: P6160675 | الرمز البريدي www.pma.ps