Some UAE Banks To Raise Minimum Balance Requirement From June 1: Report Khaleej Times

Several banks operating in the UAE are set to increase the minimum balance requirement to Dh5,000, up from the current Dh3,000 threshold established under the Central Bank's personal loan regulations.

The new requirement will take effect from June 1, with one bank having already implemented these charges recently, according to a report by Arabic daily Emarat Al Youm on Tuesday.

Under the revised policy, customers who fail to meet the new Dh5,000 minimum balance will be subject to a monthly fee of Dh25, unless they hold a credit card or have personal financing with the bank.

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Vijay Valecha, chief investment officer at Century Financial, explained“a minimum balance is the least amount of money that is required in a bank account to keep it active or get benefits like earning interest.”

He told Khaleej Times:“Banks set these minimum balances for several reasons. It helps them have more money in deposits, which they can use to give out loans and meet financial rules set by regulators. Increasing minimum balance requirements helps banks to profit from the extra fees earned and cover the high costs of maintaining customer accounts.”

The present system - placed back in 2011 and applicable to those without credit card, overdraft facility, or loan - requires a minimum monthly maintaining balance of only Dh3,000 to be exempt from the Dh25 fee.

A document obtained by Emarat Al Youm says fees will be waived for customers maintaining a total balance of Dh20,000 or more. Fees will also be waived for those with a monthly salary transfer of Dh15,000 or more.

Customers with a monthly salary transfer between Dh5,000 and Dh14,999 who also have a credit card, overdraft facility, or loan with the bank will also be exempted from the Dh5,000 monthly maintaining balance.

“A fee of Dh25 will be imposed on customers with a monthly salary transfer between Dh5,000 and Dh14,999 without a credit card, overdraft facility, or loan; as well as those with salary transfers less than Dh5,000. All bank customers who do not fall under the above categories will be required to pay a fee of Dh100 or Dh105, depending on the account type.”

Finance expert Dr Ben Lebig told Khaleej Times:“This new policy, while economically sound due to rising overhead cost of bank services, puts many of the residents at a disadvantage. There are UAE residents - especially those in the service sector - who do not enjoy high salaries and, many, if not most, would fall below the proposed threshold.”

Lebig explained the direct impact of the change in banking policy would be two-fold:“Workers would have to reduce the amount they spend for their own needs and the amount they remit to their families back home so they can build the minimum balance requirement. Or, they will be forced to take credit cards or loans to comply with the requirements.”

“For those workers whose salary is just enough to cover their monthly expenses and sending money back home, this rule seems nearly impossible to fulfill,” he added.

“I sincerely hope banks will reconsider increasing the minimum balance or, at the very least, provide a range of minimum balances and charges depending on the various salary ranges. This way it will minimise the impact to the low-income workers,” added Lebig, who also provides free financial advise to overseas Filipinos.

Valecha noted“Companies have the option of sending salaries through money exchanges or financial institutions as part of the Wage Protection System (WPS). They provide reliable salary disbursement and support for WPS compliance. This can largely benefit those who earn salaries below Dh5,000 and who do not meet the minimum balance criteria.”

“Exchange houses are cost-effective options, especially for small to medium-sized businesses. The PayRoll card offers unlimited withdrawals and enhanced security. It is accepted at branches across the UAE and comes with no issuance fee,” noted Valecha, adding:“Another option for companies is to open a corporate account so that employees earning a salary of less than Dh5,000 can benefit from prepaid salary cards, which do not require a bank account.”

“There is also an alternative to open low-cash-balance accounts inside the UAE or open a zero-balance account, or use digital account services which require zero fees and charges,” Valecha continued.

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