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Friday, 9 October 2015

Credit Card Cash Withdrawal is banned by SAMA in Saudi Arabia

The SAMA also known as the Saudi Arabian Monetary Authority has placed further restrictions on the withdrawal of cash from the banks with the use of a credit card, in one of the most prominent efforts to date to curb the consumer debt problem which is slowly becoming a grim reality in the Kingdom of Saudi Arabia. John Sfakianakis, the director for the Middle East for the Ashmore Group stated that this new move by the SAMA has come in connection with the global best practice which keeps consumers and protection in mind. Additionally the new move has also come after the retail credit which has been made available by the banks in non credit card consumer business which is to be capped at 30 percent. Summing everything up, the new move has come in a good time.



Under previous circumstances there was an informal industry agreement which could be obtained by any customer through a cash advance which equals to 50 percent of the total spend limit of the credit card, hence having to pay heavy fees in the process. Commencing from the previous Thursday, the ceiling has been officially set at 30 percent, in accordance with the notifications about the regulations which were posted on the website of the central bank, which also stated that the new rules had been aimed to protect customers and to introduce them to the international best practice standards.



An economic consultant, Fawaz Al Fawaz stated that these new restrictions have been imposed solely to protect the customers from their banks; such is also a seasonal tendency of the summer months. He added that even though he does not see a direct risk to the financial system or the bank, the move is still much appreciated. The SAMA, only last year, had published a new set of rules for consumer lending which has given it the power in order to cap the retail lending at the individual banks and also limit the fees that are charged by the banks. The reputation it has is of a cautious and conservative regulator.



The consumer lending, inclusive of the usage of credit cards has risen by 8.8 percent to a figure of $85.9 billion in the financial year of 2014 Another report has also surfaced which states that those balance sheets of the Saudi national banks which have been consolidated for the month of May are all showing a total credit, which does not include the securities investments, which have now reached around SAR 1.3 Trillion.



The analysis of the credit activity of these banks show that currently the growth pace has been in deposits, and hence the ratio for loan / deposit is at 79.3 percent which is perceived to be healthy. These figures are in accordance with the report which has issued from the NCB or National Commercial Bank. Such a high level of utilization of the capacity has indicated the low risk environment despite the changes in Saudi Fiscal Policy or the US Fed rate hikes.


Source: Arab News

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