The Central Bank of the UAE has issued draft rules aimed at pushing banks to lend more to SMEs after some lenders had cut their exposure to such companies or raised their charges. Some banks have had to make huge provisions in the past 18 months against bad debt, much of it related to SMEs, which account for around 60% of UAE's GDP. To guard against further defaults, some banks raised lending fees to the sector or withdrew from lending to such companies altogether. In a draft regulation circulated to banks in recent weeks via the UAE Banks Federation (UBF), the banking industry group, the regulator said all banks had to have a dedicated unit in place for SME lending. Banks should have set targets and limits for SME lending. Banks would have to provide an explanation to the Central Bank in cases where lending to SMEs falls below their target. Under the proposed new rules, banks should not impose "unreasonable collateral requirements" in return for lending and should provide borrowers with explanations in cases where they refuse to lend to the sector or withdraw credit. (Reuters)