Extension of UAE Central Banks support scheme a confidence booster: Bankers

Under the extended facility, banks and finance companies participating in the scheme will be able to provide new loans and facilities to customers affected by the pandemic within the applicable terms and conditions set by the Tess standards from January 1, 2021, analysts said.

“The central bank remains committed to supporting the financial system of the UAE by taking the required measures to accelerate economic recovery from Covid-19 repercussions. The extension of the applicability period of the Tess will provide relief for retail, small and medium sized enterprises, and corporate banking customers,” said Abdulhamid M. Saeed Alahmadi, governor of the central bank of the UAE.

The governor said the initiative would shield the economy from the impact of the pandemic and place the UAE in an ideal position to recover, once the pandemic is over.

Hesham Abdulla Al Qassim, vice chairman and managing director, Emirates NBD, expressed his bank’s solidarity with the bold step by the Central Bank, and said it would “further shield our customers, small and medium sized enterprises, and corporate banking clients, and provide them with a huge confidence boost as they work to rebound from the Covid-19 slowdown earlier this year.”

“We applaud the exceptional vision of our nation’s wise leadership in containing the challenging circumstances of the pandemic, and the extension of the applicability period of the Tess is just another example of their proactive efforts to continue accelerating economic recovery,” Al Qassim said in a statement.

“As a leading bank in the UAE, Emirates NBD was among the first in the industry to step up and introduce support measures to UAE businesses and we remain committed to doing everything we can to protect our customers, stakeholders,” said Al Qassim.

Veteran banker Suresh Kumar, former CEO of Emirates NBD Group, said the extension of the stimulus would provide much relief to both the banking sector and to the SMEs in the UAE.

“The extended timeline enables the banks to complete their assessment of the Covid fallout/ stress on the SMEs in terms of their liquidity and solvency impact. Equally it is a breather for the businesses to re-organise themselves, achieve cost synergies and most importantly invest in digital transformation,” said Kumar, who is the founder chairman of Indian Business and Professional Forum.

“SMEs and corporates would do well to use the opportunity to re-examine their business models, their borrowings/ leverage ratios and rejig themselves by strategising on post-Covid opportunities,” said Kumar.

“The Zero Cost Facility of Dh50 billion, which benefits retail and corporate banking customers and facilitates liquidity management for banks through collateralised funding at zero cost, will give the much needed impetus to the UAE economy severely battered by the pandemic induced contraction,” said James Mathew, former chairman of the Institute of Chartered Accountants of India, and CEO of UHY James Chartered Accountants.

Daniel Richards, Mena economist at Emirates NBD Research, said banks will be able to extend deferrals to customers who qualify for support under this scheme.

“New markets such as Israel are opening up for UAE businessmen and professionals- who have always been nimble and healthily opportunistic to tap significant new business potential,” Kumar added.

“All in all, the UAE Central Bank ought to be applauded for giving an additional six months for its generous credit facility at zero cost.

It demonstrates decisiveness and keen sensitivity on the part of the UAE leadership at the highest levels to what needs to be done in the economy,”said Kumar.

The Tess, the Dh100 billion stimulus package announced by the Central Bank on March 15, is a part of the UAE government’s overarching efforts to mitigate the impacts of the pandemic. Tess includes, apart from Dh50 billion of zero-interest, collateralised loans, another Dh50 billion funds freed up from banks’ capital buffers.

Early this month, the apex bank said its wide-ranging stimulus funds had directly impacted more than 321,000 beneficiaries including 310,000 distressed residents, 1,500 companies and 10,000 small and medium enterprises.

Mathew said under Tess, eligible bank customers impacted by the effects of the pandemic would not be required to pay their respective bank any installments, consisting of principal and/or interest/profit, for the agreed deferment period.

“However, any interest/profit accrued during the deferment period on the principal amount, will be paid by the customer at a later date, to be agreed upon with their respective bank. Banks should not charge any interest/profit on the deferred interest/profit,” said Mathew.