Dubai: A set of new but ambiguous rules on bank lending will come into effect starting Sunday and they are expected to limit customers' ability to borrow personal and car loans according to their earnings.
Customers cannot borrow more than 20 times their salary or total income and the loan must be repaid within four years, according to a Central Bank document circulated to banks.
Car loans will be ‘treated as separate' from personal loans and should not exceed 80 per cent of the value of the car being financed. The loan must be paid within five years. Banks cannot deduct more than 50 per cent of the borrower's salary and income for car loans, private housing loans, overdraft facilities, and credit cards, the document stated.
Fixed bank charges and fees will be fixed and applied to all banks in the country. Customers can open a bank account without fees, maintain a balance of Dh3,000 in their account and will be fined Dh25 for breaching that minimum balance.
The move by the Central Bank is mean to encourage more responsible borrowing and lending, improve transparency between banks and customers, and protect people from borrowing above their means, banking experts said. Fixed bank charges mean that banks will have to improve their customer service to attract and keep clients, said Jasem Al Beloushi, Head of retail banking group at Sharjah Islamic Bank.
