Abu Dhabi: In a recent meeting with representatives of banks operating in the UAE, the Central Bank of the UAE discussed measures alleviate the debt burdens of UAE nationals.

With a close follow up from the Central Bank, appropriate solutions were sought to waive the loans of the defaulters with limited and low income as several local banks and one international bank have signed a memorandum of understanding under which they will waive 50 per cent of the UAE nationals’ loans.

The Central Bank revealed that so far 10 financial institutions have signed agreements with the Debt Settlement Fund in order to implement the initiative, including Emirates NBD, National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, Union National Bank, First Gulf Bank, Abu Dhabi Islamic Bank, Mashreq Bank and HSBC.

According to the Central Bank, banks and financial institutions were instructed early this week to find solution for the issue of settling loans defaulted by Emiratis and to implement the directives of the President through suitable workable solutions to solve this issue.

Some local and international banks had given up a lot of their claims to make the initiative successful. The Central Bank lauded the efforts of the First Gulf Bank which gave up most of its rights to settle these loans and the Standard Chartered Bank for waiving off debts of 31 Emiratis after dropping legal cases without reclaiming from the Dh10 billion fund.

The Central Bank has reviewed data on the personal loans of UAE nationals submitted to it for study in March 2012. The board concluded that “the bank considers several options to find appropriate solutions for these loans and noted that the monthly instalments deducted from the monthly salaries of UAE nationals towards repayment of these loans are rather high”.

The UAE has taken a raft of steps to help citizens carrying high debt burdens. In May, it announced plans to settle defaulted loans owed by UAE nationals. Early this year the government set up a Dh10 billion-fund, called ‘Citizens’ Debt Settlement Fund’, to help the UAE nationals facing debt burden.

This initiative would benefit 6,800 UAE national defaulters of personal loans of less than Dh1 million, be they in detention, pending trial or convicted, or settling their debts through instalment schedules set by the courts of law.

According to the Central bank, financial institutions will settle citizens’ debts through instalment schedules determined by the courts.

Those who are in prison will be released and have their loans settled in accordance with specific settlement mechanisms, including deduction of 25 per cent from their monthly salaries, with undertakings not to borrow again until the loan is settled.

Loans to the private sector

Waddah Taha, chief financial analyst and economist at Zarouni Group, told the Gulf News that the UAE banks have maintained very cautious lending policy in the aftermath of 2008 financial crisis.

“The assigned committee has already reached an agreement with some local and foreign banks to facilitate payment of loans. It is normal that the banks will shoulder part of the settlement and the borrowers will shoulder the rest,” added Taha.

He pointed out that the meeting of the Central Bank with some bankers will facilitate the mechanism of settling the issue of defaulters.

“Credit concentrations vary from one bank to another and this affects their settlement procedures of defaulters’ issue,” explained Taha.