UAE: Union of Banks Requires Salary Transfer to Avoid Withholding End-of-Service Gratuity
The Emirates Banking Federation has clarified that when a customer transitions to a new job, the continuity of regular loan installments without withholding the end-of-service gratuity depends on presenting a salary transfer letter from the new employer.
It emphasizes the importance of customers informing their bank about their intention to resign and move to a new job before taking such actions.
According to the Union of Banks, customers experiencing issues with the withholding of their end-of-service bonus often fail to meet the bank's requirements, such as providing proof of their transfer to a new job and a salary transfer letter from the new employer to the same bank that granted the loan or financing. In such cases, banks have the right to withhold the entire end-of-service gratuity and may terminate the loan agreement, requiring the repayment of the remaining outstanding balance.
The salary of the customer serves as the primary guarantee for personal loans in the majority of transactions. Therefore, the salary transfer letter from the new employer is a crucial document that customers need to pay attention to. The customer should also consider whether the new employer is included in the bank's lists, as this can impact the continuation of the loan and installments as they were. Some entities may issue the salary transfer letter only after a month or two of the employee's joining.
In response to recent complaints from customers about banks withholding their end-of-service bonuses when moving to a new job, the Union of Banks explained that customers who provide a salary transfer letter, have a new employer listed with the bank, and have a suitable salary for loan deductions are entitled to receive part or all of the end-of-service gratuity. They can continue with the same installments and contracts, provided there are no objections from the banks' risk departments.
The Union of Banks encourages borrowers to cooperate with their banks by informing them of any plans to resign and move to a new job. Ensuring the possibility of obtaining a salary transfer letter is crucial for those with loans requiring regular monthly payments. This cooperative approach benefits both parties, with customers remaining committed to making payments and banks avoiding defaults. However, customers should also be aware of the laws and regulations governing the operations of these banks.