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The outbreak of corona has affected millions of people across the globe. Many have lost their source of income while others have suffered the loss of their near and dear ones. The world has come to a standstill and its effects can be seen left and right.
The economic ramifications of the pandemic can be seen all over the world. Banks in the UAE are stepping forward to lend a helping hand to those who are in dire need of financial aid like those who have availed a personal loan in UAE. The vulnerable sections in the country are promised financial support and relaxations as an attempt by the government to protect them and their interests.
The Central Bank of the United Arab Emirates (CBUAE) has rolled out the AED 100 billion stimulus package under the name of Targeted Economic Support Scheme (TESS) on March 15, 2020. The banks in the Emirates were advised to fairly treat their customers and offer temporary relief to all their customers in these unprecedented times. Under the scheme, AED 50 billion is allocated for loans that are collateralized and are to be provided at zero cost to all the licensed banks in the UAE. The other half of the AED 100 billion is allotted for Capital Buffer Relief.
As a consequence of these measures taken in light of the coronavirus outbreak, banks are able to provide relief, albeit temporarily to both their retail as well as corporate customers by delaying loan repayments of personal loan in UAE along with other loan repayments up to a period of six months starting from March 15.
With the introduction of the TESS package banks have been able to offer their clients, both retail as well as corporate, that faced the consequences of the COVID-19 ravaged economy, a certain amount of relief from making payments on the principal as well as the interest of the existing loans especially personal loan in UAE. This facility however can not be used to avail benefits if you are already in default for the existing loans or if you are a non-resident of UAE, are a government entity or are not affected by the pandemic.
The banks can use funds from the Central Bank of UAE with zero costs. These funds can be used to replace those payments that the bank was expecting from the customers, enabling the banks to offer relaxation on the date of the repayment.
The banks are expected to provide collateral that is deemed eligible by the CBUAE and is equivalent to the amount of loan that the banks require. At the same time, the banks are required to provide evidence that the funds taken under TESS are indeed used to defer payments on the principal as well as the interest of their clients. In case the bank is unable to provide the required evidence, the bank will be required to pay a default rate of interest of 10 percent per annum on the said amount that was borrowed.
Apart from this, the banks are prohibited from charging any additional fees from their customers or increasing the rate of interest on the existing loans, under TESS. The CBUAE proposes that the banks-
Banks in Abu Dhabi namely, Abu Dhabi Islamic Bank, First Abu Dhabi Bank, and Abu Dhabi Commercial Bank are lending a helping hand towards their customers by introducing seventeen initiatives that will offer support to both the businesses as well as individuals, especially those who are willing to avail a personal loan in UAE.
Similarly, Sharjah Islamic bank and Commercial bank, and also the Ras al Khaimah’s RAK Bank have vowed to support their clients especially those who have taken a personal loan in UAE, through these tough times. Some other banks have started dedicated helpline numbers and email support to their customers who are facing a financial crisis due to the ongoing pandemic. They are willing to offer deferrals on repayment or reduced repayment as well as refinancing as required by the clients.
Beyond this, despite lockdowns, the branches of most banks outside the shopping mall will be open to help their customers while ATM services will continue to be functional uninterrupted. However, to prevent the further spread of the virus, the Central Bank of UAE is encouraging the users to prefer the online and digital mediums of payment, focusing on digitalizing payments across the UAE.
Let’s see how certain banks across UAE are helping their customers through these uncertain times:
RAK Bank unveiled measures to help SMEs, businesses and individuals in the wake of the coronavirus outbreak. However, they have assured that they want to offer customised solutions to their clients in order to effectively manage the challenges faced by them.
Sharjah Islamic Bank has issued several measures to help support its customers and offer them some relief for instance to those who have availed a personal loan in UAE.
In a Nutshell
The several measures taken by the Central Bank of United Arab Emirates enable the banks in UAE to defer the payments that are expected from their customers during the harsh times of the coronavirus. With the various amendments made to the existing rules that banks abide by and the many rescheduling procedures employed by them, the clients are expected to take a sigh of relief, easing the burden on their already overwhelmed shoulders.