New loan rule
KHALIFA ISSUES DECREES ON DEBT COLLECTION AND ATTRACTING FDI
The UAE Central Bank yesterday issued a decision to amend rules on loans given out to individual banking clients. The decision obligates banks to reduce interest rates when a customer is transferring loans from one bank to another, rather than offer customers a longer repayment period.
The UAE Central Bank is amending rules on loans granted to individual clients across the country, and specifically on the transfer of loans from one bank to another.
As per a decision to change rules on retail banking and on banking loans and other services to individual clients, banks and financial services companies are obligated to offer reduced interest rates when a customer is transferring a loan between banks. This is instead of increasing the repayment period for customers.
The move comes after a decision issued by the Central Bank’s board of directors and published in the official gazette. It also comes amid a rising interest rate environment as the US Federal Reserve (and hence the UAE Central Bank) hikes rates, making borrowing more expensive.
Under the new law, customers may transfer their personal loan from any bank in the UAE in return for an early repayment commission not exceeding 1 per cent of the remaining amount of the loan, or Dh10,000, whichever is less.
Other UAE-based banks or financial services companies may accept loan transfers under certain conditions, including their full commitment to the new rules, especially those on the loan amount, duration of repayment, and monthly instalments.
As for loans that were granted before the issuance of the new law, banks should still reduce interest rates rather than increase the repayment period.
Major FDI hub
The decision by the Central Bank yesterday is one of several decisions issued by the UAE government concerning financing and the economy. Another key decision yesterday was a decree issued by President His Highness Shaikh Khalifa Bin Zayed Al Nahyan that aims to promote Foreign Direct Investment (FDI) in the country and attract further investment.
The decree-law No. 19 of 2018 aims to position the UAE as a major hub for FDI, attract technology, and provide job opportunities in various fields. According to the law published yesterday in the official gazette, an FDI unit is to be established under the Ministry of Economy, which will set up associated plans and work on their implementation following approval from the UAE Cabinet. The FDI unit will also be responsible for establishing a database for UAE investments, including data on existing FDI projects.
Sultan Saeed Al Mansouri, Minister of Economy, said the decree will drive a leap in the country’s business environment. He pointed out that increasing the UAE’s attractiveness for investors is a strategic national goal as it will help boost economic diversification efforts and increase liquidity.
Yesterday, Shaikh Khalifa also issued a separate federal decree (No. 15 of 2018) on the collection of revenues, including taxes, fees, and fines. Such revenues also include those from statement investments, proceeds of investment certificates issued by the state, and loans owed to the state, among others.
The Dubai International Financial Centre (DIFC), one of the Middle East’s finance hubs. Decrees issued yesterday are expected to make the UAE even more attractive to investors.