Emirates NBD to use work gratuity as collateral against bank loans

Customers can borrow up to 90 percent of severance pay under loan plan, says lender

Emirates NBD is Dubai's largest bank by market value

Emirates NBD is Dubai's largest bank by market value

Emirates NBD, Dubai's largest bank by market value, on Monday said it plans to offer personal loans that will be underwritten by customers’ end-of-contract employment gratuity.

Customers will be able to borrow up to 90 percent of their gratuity, with a minimum loan amount of AED10,000 ($2,722), on the premise that their severance pay is used as collateral, the bank said.

“ [It] allows customers in the medium and lower salary range to avail of personal loans… by considering the end-of-service-benefit amount as collateral against which the customer can take the loan,” said Shekhar Krishnamurthy, the bank’s head of retail assets and liabilities, in a statement.

“Loan amounts cannot exceed the total benefit amount due.”

Under UAE law, employers are required to pay end-of-contract gratuities to staff, the amount of which is dependent on the length of the employment contract.

The gratuity was initially intended to compensate for the lack of a government pension scheme for expatriate workers residing in the country.

Applicants must be salaried customers of the bank and earn a minimum of AED5,000 a month to be eligible, the bank said.

It is thought to be the first UAE lender to offer a loan plan underwritten by gratuities.

Emirates NBD said in October that its third-quarter profit tumbled 60 percent after a spike in bad loans and a provision for its exposure to debt laden conglomerate Dubai World.

The lender booked nearly $816.7m in impairment allowances in the first nine months of 2010.


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Posted by: nader

In many people's opinions, this is one of the worst ever banks to deal with. I would recommend ADCB though, many benefits and great service.
Emirates NBD is probably run by fresh graduates who have no clue whatsoever about banking.

Posted by: Yousif

Ii applied for a car loan a couple of months ago,my salary is AED 30,000 plus other perks i have a good bank account and have been the general manager of the same company for 11 years,the company have 2 accounts with Emirates NBD.The loan was declined because i have Visa card with a limit of AED 90,000 although the outstanding is zero. The managers in this bank have absolutely no clue about banking.

Posted by: gordon

I think this is morally wrong.

The idea of the gratuity is to replicate a pension. There is a huge potential that due to circumstances many a person will find he that when leaves this country he also leaves his quasi pension pot behind.
For many people this may be the last money they have. If someone does not have sufficient collateral to guarantee a loan without using his end of service benefits, then please do not give that person a loan at all.

Posted by: Nilanjan

What a joke! Instead of redefining the screening criteria for loans and ensuring that different departments within the bank are integrated and information is shared, this is merely a press clip. At the end of the day, the bank has absolutely no control over the information it stores. It doesnt analyse behaviour patters and doesnt bother to scrutinize at customer profiles to minimize risks.

Posted by: Vibin

Even if the customers are getting more than the required minimum salary for personal loans , so many genuine borrowers are not getting personal loans as the company in which they working is not listed with Banks. There must be some solution for this.

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