How Will Banks Help If You are Affected by Covid-19 in UAE?

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.

Benefits of TESS

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-

• Provide their clients with working capital relief
• Provide them new credit lines
• Provide the customers with additional financing at reduced rates of interest on personal loan in UAE among other types of loans
• Provide commissions
• Offer rescheduling of loans to their clients

Steps Taken by Banks to Help You:

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:

Mashreq, Emirates Islamic Bank, Emirates NBD, Dubai Islamic Bank and Commercial Bank of Dubai

For Individual customers: 

• Those who are first-time home buyers can avail the benefit of a complete waiver in processing fees as well as a five percent increase in the loan-to-value ratio (ranging from around 85 percent for the residents of UAE to 80 percent for expatriates)
• Those customers who have taken a personal loan in UAE, or a car loan, can take advantage of a one-month repayment holiday without any extra charges.
• Customers availing retail loans who are on unpaid leaves can seek help from their banks in taking a repayment holiday as well for a period of three months with zero interest and no additional fees
• Customers using credit cards for withdrawing cash will have to pay only half the cash advance charges
• Credit card users can also benefit from an interest free instalment plan for paying fees on educational purposes or buying groceries without any processing charges for a period of six months
• All the charges on withdrawing cash using debit cards from the ATMs of banks other than your own will be fully refunded
• All those who have to cancel their travel booking made using the debit cards, due to the pandemic will be refunded the amount of the foreign currency transaction fees that the banks charge

For Business customers:

• The minimum balance requirement for a month in order to have a business banking account has been reduced to AED 10,000
• The minimum balance charges for such accounts have been waived for up to three months
• Small business owners who have availed merchant loans, vehicle loans for businesses or equipment loans can take advantage of a repayment holiday for a period of three months with no additional charges

Abu Dhabi Islamic Bank, First Abu Dhabi Bank, and Abu Dhabi Commercial Bank 

For Individual customers:

• Those affected by COVID-19, their foreclosures on the mortgages will be stopped for customers who have defaulted up until June
• COVID affected customers get a three month extension on their credit card instalments and  repayments on existing personal loan in UAE apart from other loans without any extra bank charges
• Customers who have lost jobs or are given reduced salaries will not have to face account freezing up until September 30
• Utility bills are now to be paid with a no fee instalment plan
• All the foreign currency transactions for travel purposes made after January 1, 2020, will be fully refunded
• Interest charges on new loans, including personal loan in UAE will be reduced
• All bank charges on early settlement of an existing loan will be reduced to half
• The down-payment requirement will be cut by 5 percent for all first-time buyers
• School fees can be paid using interest free instalments
• A period of three months will be given as relaxation on payment for all new loans as well as credit cards with a reduction of fifty percent applicable on it

For Business customers: 

• Loan repayment deferrals will be applicable on all existing loans for those affected by COVID-19
• According to the directions of the CBUAE, the minimum balance requirement for all SME accounts has be slashed to AED 10,000 per month
• For SME customers who have an annual credit card transaction below AED 5 million, the merchant’s service fee charged by the banks will be reduced to half
• For zero balance accounts of those affected by COVID-19, the bank fees and other charges will be reduced up to 50 percent
• Interest charges applicable on new borrowing will be decreased
• All bank charges on early settlement of loans will be reduced by half
• Three months holiday on repayment will be applicable on new borrowing along with a fifty percent decrease in charges

RAK Bank

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.

For Individual customers:

• One can avail a three-month payment holiday for car loans as well as personal loan in UAE
• A one-month payment holiday can be taken on credit card payment
• One can take advantage of the one-time discount of 50 percent on the overdue transaction fees
• All payments made for educational and electronic purposes on credit cards can be converted into Easy Payment Plan at zero percent interest as well as no processing fees up until the next 24 months

For Business customers:

• The bank has reduced its SME Prime lending rate
• They are also offering repayment holidays for all business loans as well as asset-backed loans for six months 
• The RAK starter Zero balance current account is another scheme to benefit the new entrepreneurs and start-ups
• The Simplify platform of the bank has waived the monthly fees for a period of three months to those businesses that are involved in providing essential services like groceries and medicines

Sharjah Islamic Bank

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.

For Individual customers:

• Those customers who have lost their source of income due to job loss or have faced salary cuts due to the current crisis of COVID-19, they can apply for an instalment deferment for a period of three months without any extra charges
• Payments on all real estate loans can be delayed up to a period of one month
• The bank has also taken measures like increasing the daily withdrawal limit at the ATMs up to AED 15,000 so as to ensure that individuals do not have to visit the branches or ATMs often

For Business customers:

• The minimum account balance for business owners has been reduced to AED 10,000
• The daily withdrawal limit at the ATMs has been increased up to AED 25,000 for any priority banking clients

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.