The Central Bank Regulation No. 29/2011 On Bank Loans & Other Services Provided to Individual Customers regulates the relationship between banks (conventional and Islamic) and finance companies on the one hand, and their individual customers on the other, in a more transparent manner, so as to boost confidence in banks and finance companies and enhance credibility of the banking system.
Under Central Bank Regulation No. 29/2011, personal loan is defined as a loan that is given to individual customers, where repayments are made out of salary and end of service indemnity and/or any other verifiable regular income from a well- defined source.
A bank or a finance company must not provide personal loan above twenty times the salary or the total income of the borrower. Additionally, the repayment period must not exceed 48 months. In order to ensure that the monthly installments deducted for repayment of this loan and resulting interest are kept in a reasonable proportion to the customer's income, the deductions from his salary and/ or regular income must not exceed the limits specified under the law.
Bank or finance company must calculate the interest rate charged for personal loans, in accordance with Article 6 of Central Bank Regulation No. 29/2011.
The Article also states that all banks and finance companies must declare their respective interest rates on loans, overdraft balances and balances due for credit cards.
Article 7 of the Regulation No. 29/2011 states that Deductions from salary or regular income of a borrower, for all types of loans extended by banks (such as car and private housing loans, overdraft facilities, and credit cards faculties) must not exceed 50% of his gross salary, and any regular income from a defined and specific source at any time. If the individual has attained the age or retirement, this limitation is reduced to 30 % of his income (or pension salary). Additionally, Banks and finance companies may only take from the customer the number of postdated cheques covering the installments, and of value not exceeding 120% of value of the loan or the debit balance.
As per Article 5 of Notice No. 3692/2012 of the Central Bank of the UAE pertaining to General Terms & Conditions and Loan Agreements texts drafted and approved by Emirates Bank Association, a Loan elapses and all the installments, interest and any other fees and expenses become due and payable immediately without having to give any notification or any court ruling and without prejudice to any other rights of the Bank, upon the occurrence of any of the following events:
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