Banks in UAE warn against issuing loans without sufficient guarantees

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Abu Dhabi: The Abu Dhabi Judicial Department (ADJD) has warned banks and financial institutions against providing loans to individuals and companies without sufficient guarantees to guarantee the borrower’s or guarantor’s ability to repay the debt.

Failure to do so constitutes a violation of loan requirements and controls, which could result in the rejection of cases brought by banks to the courts of Abu Dhabi.

This step is associated with a noticeable increase in the number of disputes and lawsuits filed by banks against individuals and companies. Considering a large number of these cases, the ADJD courts concluded that the guarantee provided by the borrower is not equal or not proportional to the value of the loan, and in some cases banks will only pay money against the guarantee of the borrower or his identity documents.

The Judicial Department has warned banks to comply with loan requirements and to obtain adequate guarantees, thereby ensuring that borrowers are financially able to repay their loans. This is done in accordance with established rules, which are subject to supervision and verification by the country’s regulatory authorities.

If these rules are followed, claims brought before the courts of Abu Dhabi will certainly be accepted, while judgments against debtors will be easily enforced.

Banks and other financial institutions at the government level are legally responsible, before granting any loans, to ensure that loan applications are adequate and that the lender can repay it. To this end, they can use all available means for inquiry, given that the size of the loan must correspond to the income of the lender.

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