Gulf NRIs can no longer be lax about borrowing money

INVESloanrejFor NRIs in the Gulf borrowing from local lenders was a breeze, but now many are discovering that defaulting leads to sever repercussions including prison.

This began when banks decided to pull back on credit after the crash in oil prices and concerns on credit quality. As one food trader says – he was unable to repay loans after banks cut his credit limit and he had to leave the country as if he had stayed back, he would have been arrested when cheques bounced, so his consultants are now negotiating with banks to restructure the loan.

In fact a number of NRIs who were once powerful people are now behind bars after their cheques bounced. As a result some NRI traders have raised funds in India to tide over the crisis

One accounting firm says this is a wake up call for banks as it is time financial discipline was brought into the system to prevent defrauding, as just 50% of businesses keep proper books of account. Some who fled have been tracked to India

Besides the slide in oil prices the decision to introduce value added tax on Jan 1, 2018 (in line with the World Bank recommendation) could be a trigger for a closer scrutiny of balance sheets. Some 60% of banks have now stopped lending to SMEs. Of course defaulters are from all nationalities, but going by the population of Indians in the region, they account for a significant share.