Interest-free loan deferment backed

MPs yesterday unanimously voted to have loans interest-free for the four-month deferral period until the year-end.

Banks in Bahrain had agreed last month to defer loan instalments owed by Bahrainis and local companies, but charging interest and administrative fees.

The move followed directives by the Cabinet to help offset the negative impact of Covid-19 without affecting banks’ liquidity and financial solvency.

It was in response to an urgent proposal signed by all MPs in June to extend the six-month loan deferral period – originally from March to August – without any interest or administrative fees, until the year-end.

Ibrahim Al Nefaei, who spearheaded the proposal approved yesterday, raised concerns that people with loans could end paying triple the amount – for the following four months and in future when instalments are due.

“It’s not right for banks to profit from people’s misery; as a result of the Covid-19 crisis some people are without income, while others have seen their income reduced,” he said.

“There is no flow of tourists or business people using King Fahad Causeway and it means that the only source of business is local spending.

“If banks, for example, take BD300 monthly in interest and fees for a BD500 loan, and then retake interest on the loan after the rescheduled period, then people are being hit financially instead of being helped and that’s catastrophic.

“The loans for the four-month period should be interest-free because from what we see it is like banks are making up for the six months of no interest taken.”

Parliament legal commission head Dr Saleh Al Gatheeth said the proposal was unconstitutional as it trespassed on banks’ property.

Earlier in the day he also ruled out as unconstitutional a proposal to wipe out loans.



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