Frequently Asked Questions (FAQ) by customers of banks, investment companies, and finance companies supervised by the Central Bank of Kuwait (CBK).
First: Consumer and Installment Loans
What are the maximum limits for consumer and installment loans:
The maximum limit for consumer loans equals 15 times customer’s net monthly salary or continuous monthly income, up to KD 15 thousand. The maximum limit of installment loans allowed is KD 70 thousand including any consumer loan granted.
What is the maximum limit of the monthly installment:
The maximum limit of the monthly installment shall not exceed 40% of employee’s (30% of pensioner’s) net salary or continuous monthly income.
What is the consumer/installment loan term:
Consumer loan term is five years, renewable for one year maximum in case of non-performing loan. Installment loan term is fifteen years, renewable for 3 years maximum in case of non-performing loan.
Is a bank customer entitled to borrow money in order to make payments of an existing loan from a different bank:
According to CBK’s regulations, banks should ensure that loans are used for the purpose specified, such as purchasing consumer and durable goods, education or medical expenses, in case of consumer loans. And for the purchase/restoration of private housing in case of installment loans. Loans cannot be used for payment of an existing loan from another bank.
Is it permissible to combine the salaries of spouses:
Merging of customers salaries of first degree kinship including spouses, and sponsorship between spouses is not permissible for installment loans only according to CBK’s regulations issued on 8-6-2004.
Does the bank have the right to reject customer’s loan application? What is the role of the Central Bank of Kuwait in this regard:
Loan-granting decision is delegated to the lender and is based on the credit study conducted. The Central Bank of Kuwait has no role in this respect.
Second: Credit Cards
What is the maximum limit of credit cards:
The maximum installment amount allowed, resulting from the usage of a credit card, shall not exceed ten times custmer's net salary or continuous monthly income, subjected to a maximum limit of KD 10 thousand.
What is the allowed repayment period of debit balances:
Repayment period of debit balances resulting from the use of credit cards shall not exceed one year, non-renewable.
Is a bank entitled to cancel a credit card without referring to the customer:
Cancelling a credit card is subject to the terms and conditions mentioned in the contract signed between the bank and the customer, not to the CBK's regulations.
What is the maximum limit for the monthly installment of a credit card:
Total installments deducted from customer's account in settlement of debit balance resulting from the credit cards, including repayment of the installments of consumer installment loans - finance transactions - whether through the bank issuing the credit card or other creditor parties, shall not exceed 40% of employee's (30% of pensioner's) net salary or continuous monthly income.
Third: Interest Rates
What is the maximum limit of interest rate on customer and installment loans:
The interest rate on these loans is 3% above the Central Bank's discount rate (Attachment includes a statement of changes in discount rates during previous years).
Is it permissible to deduct the interest in advance:
It is not permissible to deduct the interest in advance for consumer or installment loans, effective 30-3-2008 according to CBK's regulations issued on 24-3-2008.
How is the interest on consumer and installment loans computed (Is it fixed or variable):
Consumer loans are granted according to a fixed interest rate (change of interest rates does not affect existing loan's interest rate) according to CBK's regulations issued on 24-3-2008. However, fixed interest rate applied to installment loans is reviewed and adjusted upward/downward every five years by no more than 2%. For example, a customer installment loan granted at 5% interest rate, shall be affected by only 2% of any interest rate increase (e.g. 10%) made at the end of the first five years of loan payment, i.e. the new interest rate shall not exceed 7%.
Fourth: Fees and Commissions
Is a bank entitled to charge fees:
Banks are obliged to adhere to the list of fees and commissions approved by the CBK. Customers are usually made aware of this list.
Are fees and commissions standardized in all banks:
There are no binding regulations for banks to apply standardized fees or commissions, as these vary according to the nature of the customer service provided. Fees are approved by the CBK based on a relevant study to ensure that fees charged correspond to the actual services provided to the customer.
Is a customer entitled to redeem the insurance payments:
For loans granted prior to the issuance of the Central Bank of Kuwait regulations on 24-1-2007 concerning insurance fees on consumer and installment loans, the recovery/non-recovery of insurance payments vary from one bank to another in accordance with the insurance agreement signed between the bank and the insurance company on one side, and the customer and the bank on the other. For loans granted after that date, repayment of insurance amount shall be made on a monthly basis. In case of early loan repayments, the customer shall be exempted from the remaining installments.
What is the maximum limit of insurance fees borne by the customer:
According to CBK's regulations issued on 24-1-2007, insurance fees shall be paid equally (50% each) by the bank and the borrower provided that the amount of insurance fees borne by the customer does not exceed a maximum of 2% of the loan amount. The bank shall bear the remaining percentage which shall be no less than the percentage borne by the customer.