Circular dated January 11, 2016 regarding the ratio of the value of the installments due to the individual’s monthly income regarding the loan portfolio for consumer purposes

Cairo: January 11, 2016

Dear Mr. / Chairman of the Board of Directors

Bank

Greetings and after,

In light of what has been observed recently regarding banks' tendency towards growth in the portfolio of loans for consumer purposes, which has become a high percentage in some banks' loan portfolios, where it is observed that there is a mismatch between the ratio of consumer loan installments to income and the value of granted loans, and this ratio ranges in some banks between 50% to 60%, which may raise risk rates and affect the medium-term quality of the portfolio and increase default rates.

And in line with international practices regarding the necessity of having ratios for the total value of the due installment to the monthly income of the individual, the Board of Directors of the Central Bank of Egypt, in its meeting held on January 6, 2016, decided the following:

Banks are committed to ensuring that the total installments of loans for consumer purposes (credit cards, personal loans, and loans for purchasing cars for personal use) for the client, as well as housing loans for personal housing outside the framework of Law No. 148 of 2001 issuing the Real Estate Financing Law and its executive regulations, do not exceed 35% of the total of his monthly income after deducting the amounts due for taxes and social insurance. This ratio is increased to reach 40% in the case of granting housing loans for personal housing in accordance with Law No. 148 of 2001.

This applies to what is granted of loans for consumer purposes from the date of notifying banks of this decision.

Please be kind enough to alert regarding taking the necessary action to implement the mentioned decision.

And please accept the highest respect Gamal Naguib