The UAE Central Bank is unlikely to scrap caps aimed at limiting bank loans to individuals as it seeks to avoid the excessive lending practices seen during its boom years, banking analysts said.An official from the central bank\'s supervision department was on Sunday reported as saying the curbs would be reviewed at the start of 2012, after feedback from consumers and banks complained the curbs were too restrictive.“The caps on retail lending are to prevent over-leverage and that doesn’t look likely to change,” said Liz Martins, a senior MENA economist at HSBC.“The answer to our economic problems is not allowing people to borrow more than 20 times their salary. The central bank [...does] want to encourage lending, but the right kind of lending. By removing the caps, you are encouraging over-leverage.” The controversial curbs, which were rolled out in May, capped personal loans at 20 times a borrower’s monthly salary and said repayment periods should not exceed 48 months.Monthly installments for all loans, including personal, car, housing loans and credit cards, must not exceed 50 percent of a customer’s gross salary and any regular income, the central bank said. The global financial crisis and Dubai\'s debt woes have slowed lending growth in the OPEC member. Private sector credit growth was flat year-on-year in May compared with rates of over 50 percent in 2008.A senior credit officer for GCC banks at Moody’s, Khalid Howladar, said the regulations were key to avoiding the wave of consumer debt seen in 2007-2008. “Regulation has a critical role to play in ensuring stability of the banking system and hence the economy of the country, so I think that for the time being they [the Central Bank] will leave [the caps] in place until they properly analyse the feedback received,” he said. “Overly aggressive lending may yield short term profits but ultimately creates problems for borrowers and their banks in the future. The central bank is trying to pre-empt such problems.” There is confusion over the extent to which the caps are restricting credit growth. Analysts say UAE loan growth has been more constrained by risk aversion among banks and a slow real  estae market, than the caps.“We do have very sluggish loan growth here, but this is not because retail loans are being capped at 20 times people’s salary, there are lots of other reasons,” said Martins. “Theoretically the central bank will be looking to spur lending, however I think the scars and impacts of debt are still too recent. If you want to spur private sector growth and non-oil growth in particular, then you would be looking to encourage lending to businesses.” In May, UAE Central Bank governor Sultan bin Nasser Al Suwaidi urged local lenders to slash interest rates on loans to SMEs, which account for 95 percent of businesses in Dubai and contribute to around 40 percent of the emirate’s GDP.He referred to a new era of “abundant” liquidity, after bank deposits in the Arab state rose to their highest level in more than two years, amid the wider Arab Spring unrest. From / Arabian Business News