Saudi Arabia's central bank has tightened limits on consumer lending after a surge in credit, which has helped drive Saudi shares to record highs, bankers said on Saturday.
They said the Saudi Arabian Monetary Agency (SAMA) told banks to cut the term of loans to five years from 10 and cap their value at 17 times a borrower's monthly salary from the previous limit of 27 times.
"It's an initiative in response to the level of personal credit in the market," said one banker who asked not to be named, adding the instructions were sent out to banks earlier this month.
High oil revenues in Saudi Arabia, the world's biggest crude exporter, have fuelled a sharp increase in money supply, corporate profits and bank lending in the kingdom.
With the Saudi riyal pegged to the dollar, Saudi Arabia keeps interest rates close to those of the US Federal Reserve, but has raised them about 50 basis points above US rates in recent months, partly to check spiralling money supply growth.
The growth in bank credit to investors has been one factor behind the surge in Saudi shares, which have doubled in value this year and are seven times higher than in November 2002.
SAMA's latest figures show consumer loans jumped to 149.1 billion riyals ($39.8 billion) at the end of the second quarter, up from 92.2 billion riyals a year earlier.
Just over a quarter of the loans were for real estate, cars and equipment, according to the SAMA figures, while the remainder was for "other" purposes. Bankers say much of that money has gone into the Saudi stock market. In the year to June, lending rose 3 percent for car purchases and 38 percent for real estate financing. But loans for "other" financing shot up 47 percent, or 52 billion riyals.