Questions & Answers
Lending money to a client whose debt burden ratio is above 50%
Dear Mr. Mazen,
Wish to seek your advice on the below issues please:
1) Can a bank or financial institution lend money or issue a credit card to an individual even though his / her Debt Burden Ratio (DBR) is above 50%? The UAE Central Bank regulation, as per a gazette of 28th November 2013, states that it is not possible?
2) Can a bank or a financial institution demand from an individual a 'blank cheque' (no amount, no date but only a signature of the customer) as a guarantee at the time of issuing a credit card or loan?
Is this practice legal as chances of misuse are possible?
Thank you in advance and looking forward to your response at the earliest convenience, please.
Best Regards,
Dear sir,
Such a loan will be at the bank total risk and it violates the regulations of the Central Bank.
As for the blank cheque, nowadays, the bank usually asks the client to provide a cheque with a total amount of the credit limit or the loan.
However, if the bank asks for a blank cheque, it can't be considered as a chance for misuse because the purpose of the blank cheque is (in case the borrower fails to settle his/ her obligations) to fill the due amount by the bank and proceed with legal actions against the borrower.
Notwithstanding the above, I do not advise to sign a blank cheque.
