The Debt Panel: 'I withdrew my gratuity before the bank could freeze it. Is this OK?'

The Abu Dhabi resident wanted to ensure his family had enough money to pay for food during the pandemic

Illustration by Mathew Kurian 
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I recently resigned from my job working for a financial services company, with my final day on March 1. Three days later I received a new visa from my new employer.

I now have 21 months of payments to make on a Dh200,000 personal loan I took out in December 2017 to help set up a business in the Philippines, where I am from. There is now Dh100,000 left to pay and my monthly payments come to Dh4,900. I have no other debts.

I took the gratuity money out to pay for my son's tuition in the Philippines and to ensure my family back home had enough money to pay for food during the coronavirus pandemic.

After completing my last job, my Dh20,000 end-of-service benefit was transferred to my bank by my employer. I assumed the bank would freeze the account, so I tried to withdraw Dh10,000 – half the gratuity amount – the same day it landed. I was surprised when I was successful. The next day I decided to withdraw another Dh6,000, so in total I withdrew Dh16,000 of the gratuity amount. I then left the rest of the money in the account to cover my next loan instalment.

I took the gratuity money out to pay for my son’s tuition in the Philippines and to ensure my family back home had enough money to pay for food during the coronavirus pandemic.

I earn Dh12,000 in my new role, Dh1,000 more than my last job. My monthly expenses outside the debt repayment come to Dh4,200 a month.

On March 21 I submitted documents to the bank to account for my job move, such as my Emirates ID, residence visa and salary transfer letter. I then asked the bank representative about my withdrawals. He told me I had been lucky because the bank had failed to freeze my account. I asked him if I had made a mistake taking the money out and he said no. He then told me to wait for a few days for the bank to call me to confirm my documents had been verified.

When I did not hear from the bank, I called to confirm they had received my documents. The guy from their collection team was very rude and told me to return the money I had withdrawn. He asked why I had withdrawn the money without informing the bank and said the bank might file a legal case against me. How should I handle this situation? AJ, Abu Dhabi

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

You are right about the action banks take when they receive a customer's end-of-service benefit settlement if they have a loan outstanding with the lender. Often, as a precautionary measure, UAE banks place a lien on the customer’s bank account. This is because banking guidelines mandate that banks only lend to individuals with a valid employment visa and earn a minimum salary, and banks need to confirm these conditions will continue to be met when the customer resigns from a job.

What does work in your favour is that you proactively informed the bank of your change in employment and provided them with the required documentation.

As a first step I suggest you contact the bank and submit evidence of your new job such as the employment letter and residence visa as well as a salary transfer letter from your new employer.

Ask for a call with the unit responsible to go through the documents. Then explain that your salary from your new employer will continue to be credited into your existing bank account and reiterate that you intend to service the remaining instalments of your loan diligently and that you remain fully committed to clearing the outstanding dues. Explain that you had no ill intentions when withdrawing funds from the account, especially given your concern for the family with the ongoing Covid-19 situation.

I am certain the bank would appreciate your forthrightness and close this matter immediately.

Debt panellist 2: Ambareen Musa, founder and chief executive of

When an employer deposits your final salary and end-of-service benefits into your account, this can be a red flag for the bank, especially if you have outstanding debt. Without prior notification, the bank may assume that you were terminated and may not be in a position to repay your debt. The bank has the option of freezing the funds in your bank account including your final salary and gratuity until it is satisfied there is no risk of loan default.

Your case probably went under the radar since you have been making all your repayments on time. Now that you have provided your bank with all the documents verifying your new employment and income, there is no reason for the bank to question you regarding the withdrawal of your end-of-service benefits. In any case, once your loan instalments keep getting deducted as per schedule, this issue should resolve on its own.

However, if you feel that you are being unfairly harassed by bank representatives and want to pursue the case further, you can lodge a formal complaint with the bank. If you do not hear back on this or are not offered a resolution, you can file a complaint with the Central Bank of the UAE. Simply fill out a form on the central bank's website or call the toll free number 800 CBUAE (800 22823).

Given your monthly expenses and assuming this loan is the only debt you owe, you should not have a problem keeping up with your loan repayments.

To make sure your debt repayment capability is not affected in the future, it would be a good idea to prepare an emergency savings fund. As you are left with around Dh3,000 every month after paying for expenses and the loan repayment, you can start putting away about Dh1,000-Dh1,500 into your emergency savings. This will give you a financial cushion to fall back on in case of unforeseen financial hardship – a must-have, given these uncertain times.

Debt panellist 3: Keren Bobker, an independent financial adviser with Holborn Assets

I am always disappointed to hear of banks being impolite to customers. You were just contacting the bank to ensure they had your paperwork. Some bank employees need to be reminded they are dealing with human beings.

It is standard practice for banks to freeze an account once they are notified of a final salary payment and there is a debt, but there is no law that says that they have to do this. It is more a matter of practice to minimise their risk. This means the bank does not have an automatic right to retain a gratuity payment, unless this is somehow documented in the loan terms. Even then, it is up to the bank to take action.

Some banks will apply this payment to the loan to reduce it but I have always considered this unfair where payments are up to date and an individual is moving to new employment without a break.

If you have been making payments regularly as agreed, and have not missed any payments, there is no good reason why the bank cannot allow that situation to continue. I see no reason for the bank to file a case as you have done nothing wrong. They do not have grounds to do so and that is an unpleasant and empty threat. If anything, you have grounds for complaint for being treated in this way.

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to