The Debt Panel: 'Can my bank increase the interest it charges on a restructured loan under the Tess programme?'

The Dubai resident had his salary reduced by 50% because of Covid-19 and qualified for support from his bank but is now paying an extra Dh5,209 in interest charges

Mathew Kurian / The National
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In May, my company reduced my salary by 50 per cent – from Dh24,000 a month to Dh12,000 – due to the effects of Covid-19. I am still working, but it is likely my salary reduction will be in place until the end of the year, pending further reviews of the business.

Because of the reduction in my salary, my bank agreed to restructure my personal loan under the Central Bank of the UAE’s Targeted Economic Support Scheme (Tess). The original principal amount of my loan was Dh182,270 for a period of 22 months, with monthly instalments of Dh8,300.

Under the restructuring of the loan, the total amount now owed is Dh188,000, to be paid over a period of 29 months and monthly repayments of Dh6,460. I was also given a payment holiday of three months.

However, the restructuring of the loan now includes a higher interest rate as well as interest charges on the holiday period. Before my loan was restructured, I was paying 3.51 per cent interest, but now I am paying 3.79 per cent, or a total increment of Dh5,209.

Furthermore, the bank gave me just two days to submit the required documents for the restructuring and accept their updated terms, or otherwise continue with the original finance arrangement.

When I asked the bank why the interest rate had increased, the representatives claimed to have no knowledge about interest rates or charges for the holiday period, although they did indicate that it was included in the forms that customers have to sign when they accept the restructuring terms.

My concern is that banks were given assistance under Tess to offer relief to customers during the pandemic, but it seems that they are offering new deals for restructured loans that have higher interest rates.

This doesn't seem like fair practice and I would appreciate it if you could explain the Tess guidelines and the reason why banks are increasing their interest rates on restructured loans during the pandemic. Is this allowed and is there anything I can do about it, such as making a complaint against my bank?  SB, Dubai

Debt panellist 1: R Sivaram, executive vice president, head of retail banking products, Emirates NBD

These are challenging times and I am glad that you remain conscientious about managing your finances.

As you have highlighted, banks in the UAE, along with support from the Central Bank of the UAE, implemented various programmes to support customers impacted by the pandemic situation.

Since this restructuring provision increases the risk taken on by banks for a longer loan term, the banks may levy a higher interest rate to counter that.

Most banks introduced loan moratorium options to give customers immediate relief on their monthly loan payments, while some also provided relief measures for card repayments, account balance requirements and other areas. The Central Bank has played a strong role in these efforts by introducing programmes such as the Tess.

In addition, some banks have gone the extra mile and offered additional loan instalment deferments, along with attractive debt-restructuring programmes. In the case of the latter, the terms of the re-structured loan may often differ from the existing loan in line with the longer tenor of the new loan, as well as prevailing policies of the bank.

In your specific case, the pricing on your re-structured loan may have been impacted by this, but I hope that the restructuring has helped in reducing your monthly instalment significantly so as to help you manage your finances better.

I hope that your work situation returns to normal soon so that you can plan to pay off the loan earlier than scheduled, and I wish you the very best of luck.

Debt panellist 2: Steve Cronin, founder of

There seems to be grounds for you to make a complaint. The Tess standards document is clear that it expects banks to comply with both the letter and the spirit of the standards. There are penalties for non-compliance.

There are, however, some subtleties. The standards say that banks can offer relief on "principal and/or interest". So if your monthly payment was Dh5,000, of which Dh4,000 was principal and Dh1,000 interest, the bank can make you pay zero, Dh1,000 or Dh4,000 over the relief period and still comply with Tess.

What they cannot do is charge you "any fees/penalties/interest" on amounts deferred, so they could not charge you additional interest on any part of the Dh5,000 you did not have to pay during the relief period. So you need to clarify with the bank whether they are charging you just the interest component of your normal monthly payment over those three months of relief (which they are allowed to do) or additional interest for not making full payments during the relief period (which they are not allowed to do).

If the loan was specifically restructured under the Tess programme (rather than just a payment holiday granted, with a separate restructuring after), then the bank is not allowed to increase interest rates. The standards clearly say the banks "shall not increase interest rates for customers benefiting from this scheme".

To complain, you should inform your bank in writing (and why not by phone as well?) that you believe you have been treated in a manner that goes against the word and spirit of the Tess programme, listing out the reasons why. Tell the bank that it has one week to remedy the situation, otherwise you will be making an official complaint to the Central Bank on a specific day. If they do not act to your satisfaction, then make a complaint to the Central Bank's Consumer Protection department. You can do this online by filling in a form or in person at their Dubai branch. You can call 800 CBUAE ((800 22823) to ask them about the complaints process.

You will need to submit documents showing that you had the loan, that it was restructured under Tess and that you complained to your bank before going to the Central Bank. You will be given a reference number and then notified by email or phone about the outcome of your complaint. Good luck!

Debt panellist 3: Ambareen Musa, founder and chief executive of

The Tess programme was launched in March to support the economy and help banks offer financial relief to individuals, SMEs and other private companies.

The biggest provision introduced under this economic stimulus package was temporary relief from the repayment of loans, as well as various other measures including interest-free credit card instalments and a rebate on bank fees.

If the loan was specifically restructured under the Tess programme (rather than just a payment holiday granted, with a separate restructuring after), then the bank is not allowed to increase interest rates.

UAE banks have proactively offered up to three months of payment holidays to borrowers who were financially impacted during the Covid-19 crisis, and you too have benefited from the same facility by your lender.

However, if a borrower continues to financially struggle beyond this three-month period, the bank may review their case based on individual circumstances and the bank's own protocol.

It is becoming increasingly common for banks to offer a restructured repayment plan to qualifying borrowers beyond the three-month payment holiday. However, since this restructuring provision increases the risk taken on by banks for a longer loan term, they may levy a higher interest rate to counter that. The terms on which a loan is restructured on a case-to-case basis may have a lot to do with a borrower's profile, credit history and employment details.

If you are not satisfied with the support your bank has offered, you can try to negotiate with the bank further and explore any other relief options available to you. Alternatively, you could lodge a formal complaint with the Central Bank.