ABOUT TERRITORY
Bank Of Baroda had started its operations in   UAE in the year 1974 with opening of Dubai   Branch. It is the only Indian Bank operating in UAE. Gradually the operations were expanded over the subsequent years and   branches were opened in Abu Dhabi, Deira, Sharjah, Ras Al Khaimah and Al Ain.

 

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Country and Economy
Land Area: 82 880sqkm
Capital: Abu Dhabi
Currency: UAE Dirham (AED)
Language: Arabic, although English can be used almost anywhere, especially in the business community. Hindi and Urdu are also widely used.

Geography
The UAE lies on the southernmost shore of the Arabian Gulf, and stretches almost as far as the Straits of Hormuz in the north. The western and southern border is with Saudi Arabia, and the eastern with Oman. Almost all of the country is focused on the Gulf coast, except the emirate of Fujairah on the Indian Ocean. The emirate of Abu Dhabi is by far the largest, occupying around 87% of the total land area; the rest is shared between the other six emirates. Most of the emirate is a sand desert, and the other emirates are all a mixture of semi-desert scrub-land, or mountainous. The climate can be very harsh indeed, especially in the summer with temperatures reaching the high 40s and paralysing humidity, mainly on the coast.

 RECENT HISTORY

1.       The United Arab Emirates is a federal sovereign state, which consists of -7- Emirates namely Abu Dhabi,
Dubai, Sharjah, Ajman, Umm Al Quwain, Fujairah and Ras Al Khaimah.  The Federation was established on 02.12.1971 of -6- Emirates, then the Emirate of Ras Al Khaimah joined the Federation on 10.02.1972.

2.       According to the UAE Constitution, the Supreme Council of the Federation is the highest political authority in the country.  It consists of all the Rulers of -7- Emirates.  The President and Vice President of the country are elected by the members of the Supreme Council.  The President appoints the Prime Minister with the consent of the members of Supreme Council.  The members of Federal Government are appointed by a decree from the President upon recommendation from the Prime Minister.

3.       The Federal National Council (FNC), which consists of representatives of each Emirate, is the Legislative Council (Parliament).  It exercises the authority to discuss and approve all Federal Laws and then refer them to the Supreme Council for enactment.  This is in addition to its role in discussing the issues of interest of the citizens and controlling the performance of the Federal Government.  Federal Council of ministers exercises executive authority.  The Sharia is the common and civil law but there are commercial and federal laws as well.
Though the -7- Emirates of Federation decided to combine their governance in foreign affairs, defence and social services, individual governments of the Emirates have retained their autonomy for their internal affairs.

4.       On the international level, UAE is a member of Arab league, the Arab Gulf Co-operation Council (AGCC), the United Nations, the World Bank, IMF and many other international organisations like ILO, WHO etc.  Being an important oil producing country, it is also member of OPEC and OAPEC (Organisation of Arab Petroleum Exporting Countries).

5.       The official currency of UAE is Dirham  (abbreviated as AED), divided into 100 fils.  The exchange rate of UAE Dirham has been pegged against US Dollar since the end of 1980 @ 1 US$  = AED 3.673.   In terms of Rupees, 1 AED = Rs. 12.35 (approx.) as per present rate.

6.       UAE, in practice, is considered a tax-free haven.  Only oil companies and banks are subjected to taxes.  Banks are subjected to tax of 20% on their profits in the emirates of Abu Dhabi, Dubai and Sharjah.  The emirate of Ras Al Khaimah does not have such tax.  There is no taxation on personal income in UAE.

7.       The total area of U.A.E. is about 87,340 sq. kms.  Abu Dhabi is the capital of U.A.E. and Dubai is a major trading centre.  The population of U.A.E. is about 3.754 mn.. Expatriates constitute majority of total population.  The number of Indian expatriates is estimated around 900,000. The total work force in UAE is 1.624 mn.

8.       At present there are -46- commercial banks, (20 local banks and 26 foreign banks) with -421- branches (312 branches of local banks and 109 branches of foreign banks).  Besides there are large number of foreign exchange dealers and exchange houses issuing foreign drafts.  The country is considered over banked. The foreign banks can have maximum 8 branches in UAE.

9.       Our Bank is the only Indian bank operating in UAE since June 1974.  We had a network of -8- branches out of which -2- branches viz. Umm Al Quwain and Fujairah were closed in July 1986 and October 1987 respectively as they were incurring loss and were considered non-viable.  One branch at Abu Dhabi  viz. Sh. Zayed Street branch was merged with Abu Dhabi Main branch and in lieu of same, a new branch was opened at Al Ain in September 1995.

10.   At present following six branches are operating in UAE from the date mentioned there against:-

11.   As advised by Central Bank of the UAE, ranking of our Bank as on 30.06.2003, out of -46-commercial banks was 28 on the basis of total assets and 26 on the basis of deposits.

 POLITICAL SCENARIO
UAE enjoys political stability under the leadership of President Sheikh Khalifa bin Zayed Al Nahyan who is also Ruler of Abu Dhabi .He was elected as the new President of the United Arab Emirates on 3rd November, to succeed his father, the late HH Sheikh Zayed bin Sultan Al Nahyan.
Ruler of Dubai, H.H. Sheikh Maktoum Bin Rashid Al Maktoum is the Vice President and Prime Minister of the country.
The relations of U.A.E. with India continue to be cordial.  Indo-UAE extradition treaty was also signed in October 1999.

 ECONOMIC SCENARIO
Although the economy of UAE revolves around production and export of oil, Government has taken steps to diversify the sources of income from oil resources to non-oil income, particularly from exports, tourism, etc.  The share of non oil export is gradually increasing in the total export revenue of the country.  The government is making determined efforts to increase and improve the manufacturing base in the country alongwith simultaneous thrust to the service sector.

The important economic indicators of UAE economy are as under:

Source: Central Bank of the UAE, Ministry of Planning.
The non-oil sector has played an increasingly important role in the economy over the last few years.  However, oil still represents roughly 30% of GDP and 70% of total export revenue.

In order to diversify the economy, UAE Government has taken several developmental measures as under:

a.       Setting up of Dubai Financial Market (DFM) to enlarge the capital market and debt market operations.

b.       Formation of Dubai Internet City and Dubai Media City.

c.       Floating of Abu Dhabi Stock Market.

d.       Establishment of EMAAR properties for development of real estate business in UAE.  Recently they
have established “Dubai Bank” for carrying out banking business.

e.       Promotion of Emirates Group of Companies to undertake business in aviation and banking/ financial services.

f.        DUBAL, an aluminium company of Dubai, ranking among the first five aluminum companies of the world.

g.       Dubai International Financial Centre (DIFC) has been recently established which will initially focus on five areas of activities in the financial industry i.e. asset management, Islamic finance, (Re) insurance,
back office operations and the establishment of a Regional Financial Exchange to foster a cross border
efficient and liquid capital market.

h.       Dubai has hosted IMF/ World Bank Meet in 2003, the project is known as ‘DUBAI 2003’.

BANKING ENVIRONMENT IN UAE

         I.            The UAE is considered as an over banked country.  There are 46 commercial banks with over 421 branches operating in UAE.  The competition amongst the banks is acute especially to increase the lending to established/reputed advances clients bearing fairly low risk.
Our Bank has an advantage in a way that Indian population is fairly large in UAE and we are the only Indian bank.  Our finance is mostly to the ethnic community.  However, over the years, lending has been diversified to include UAE national borrowers as well.

        II.            There are no Forex regulations/restrictions and free flow of capital is permitted.  There are number of exchange houses in the country where currency of any country can be freely exchanged with that of others.  There are exchange houses operated by State Bank of India, Canara Bank and State Bank of Travancore.  There is complete deregulation of interest rate structure for the banks.

      III.            The competition among the banks is quite high as they compete for the limited business available in the country.  Multiple banking arrangement by borrowers is quite common as there are no restrictions for obtaining credit facilities by the borrowers from various banks.  The system of financing borrowers through consortium of banks is not in vogue.

       IV.            Banks do not share information in respect of their borrowal accounts due to local secrecy norms as also fear of losing good accounts.  Exchange of information amongst different banks is not well established.  Other banks provide with only bankers/credit reports on their clients which are very general in nature and do not throw much light on the credit worthiness of the borrower.

        V.            The Central Bank of the UAE has established Risk Bureau which provides information regarding the aggregate credit facilities enjoyed by the borrowers from the entire banking system along with its utilisation, secured portion, unsecured portion etc.
The Central Bank of the UAE has initiated action for going online for the purpose of Risk Bureau Reporting.  With the introduction of online reporting, information on exposure of banking system on various borrowers will be readily available and will help the banks in monitoring the accounts effectively.

       VI.            Accounting standards are not well developed.  Till a few years back many of our borrowers were not submitting regular financial statements and our Bank had been extending credit facilities based on only brief financial parameters viz. sales, purchases, net profit, capital etc.  In choosing customers and extending credit facilities, we were relying on the factors like long establishment, past experience, cash collaterals etc.  However, now almost all borrowers have started submitting financial statements though in some cases, the same may not be audited.

     VII.            a) In most of the accounts, advances are sanctioned based on the standing  of the expatriate partner(s).Though the share held by the UAE national is 51% in a limited liability company, the documents of our Bank are generally signed by the expatriate partner only as the UAE national is not allowed to be made liable.  Even in the case of advances to sole proprietary concerns, wherein the trade licence is issued in the name of UAE national, the documents of our Bank are generally signed by the expatriate partner based on the power of attorney given by the UAE national.  Such facilities would be guaranteed by the expatriate investor only.
b)      Security by way of hypothecation or pledge of stocks is not valid.  Therefore most of our advances, as also of other banks, are clean.
c)       Expatriates are not allowed to own properties. Therefore security by way of mortgage
on property is not possible where financially interested person is a non national (expatriate).  Recently    Dubai Government has started selling/ leasing on long term basis residential properties to non UAE nationals.
d)      In order to build up the cushion against the possible loss, cash collateral as a percentage of the facilities are insisted as far as possible.  Possessory pledge of movable fixed assets and personal guarantees are the other possible securities available.
e)       The market in UAE is volatile.  Since the expatriates cannot own properties, their companies do not have strong roots.
f)       Bouncing of cheques due to financial reasons is a criminal offence.  Making payments by way of post dated cheques (PDCs) is a common practice in trade circles.  During adverse market conditions when the realizations get delayed, due to mismatch of cash flows, many a times the cheques issued for payments get dishonored.  When unable to manage, the traders tend to flee the country to avoid criminal action and arrests leaving the dues of the banks unpaid.  There are no bankruptcy laws.
g)      The practice of running several business establishments in different names by the same person/group of persons is widely prevalent.  In many such cases, banks consider credit facilities to the group/companies on the combined financial statements of the group as a whole.
h)      In the absence of borrowers submitting the required information, there are practical difficulties in assessing working capital requirements.  Banks in the country generally grant credit facilities to the borrowers mainly based on the market reputation and sales turnover of the party.  However, we insist our borrowers for submission of various information for assessment of their financial requirements.    

In view of various factors given above, risks involved in lending in UAE are more.

    VIII.            Local trade laws differ from one emirate to another.

     IX.            The limited liability companies in UAE are mostly owned by individuals and are formed to comply with the local legal requirements.  They are generally one-man companies.

      X.            The capital market in an organised way is now emerging in the country.  The stock exchange (Dubai Financial Market) has been established in March 2000.  Presently, shares of only few companies are traded on it. The investment avenues like debt instruments, Govt. Bonds, Treasury Bills etc. are absent in UAE. Thus, banks have to look at credit as the only asset to be created to improve yields.

     XI.            Due to inherent risks in lending as mentioned above and absence of investment opportunities, the major thrust of many banks, has been on retail business, retail lending including for consumption purposes (salary linked loans) and other fee based business.

          FOR MORE DETAILS ON UAE PLEASA LOG ON TO www.uae.gov

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PRODUCTS & SERVICES PROVIDED BY UAE BRANCHES 

        I.            DEPOSIT  PRODUCTS

a) Current Accounts – Minimum Balance AED 5000/- (Local currency i.e. Dirhams) - Interest  -NIL.

b) Special Current Accounts for individuals (SB Account with Cheque Book facility) Minimum Balance AED.1500/- - Interest –NIL-. 

c) Savings Bank Accounts – Minimum Balance AED.500/-  - Interest 0.4%p.a. No cheque books facility.

          d) Deposits in Local and Foreign Currency:

At present bank accepts short deposit for a period not exceeding 12 months in local as well as in foreign currency.

Interest Rate 2.50% - 3.25% for USD, AED (depending upon their term of deposit)

Minimum Amount AED 5,000/- USD 5,000/- EURO 5,000/-, other currencies i.e. GBP 3,000/-.

Bank also opens Savings and Current Accounts in selected Foreign Currencies such as Dollars/ GBP/ EURO.

2. LOAN PRODUCTS

          a)       Salary Linked Loans / Personal Loans        

These Loans are given to individuals for specific purpose secured by Assigning Salary and end of service indemnity or any regular income from well defined source which do not exceed AED.250,000/-.
Rate of Interest: 11%p.a. to 12%p.a. on reducing balance. Confessional rate of interest is considered by the Competent Authority,  depending on the merits of the case. 

          b)       Vehicle Loans- BOB Auto Finance

A Vehicle Loan scheme has been formulated for salary class individuals, professionals, Entrepreneurs,

Business Firms/Companies etc Maximum AED 500,000/- for new cars and AED 50,000/- for second hand vehicles.
Rate of Interest :  3.85% to 4%p.a. flat or 8%p.a. on reducing balance.

          c)       Fully Secured Advances

Nature of Security                       

(a) Local Deposits (AED/ USD)  - For limit of AED 200,000/- and above, rate of interest is 1.5% over deposit rate and where the limit is less than AED 200,000/-, rate of interest is 2% over the deposit rate.

(b) Local Deposits (Other currencies)  - For limit of AED 200,000/- and above, rate of interest is IBLR for 3 months plus 1%, minimum 7% p.a. and where the limit is less than AED 200,000/-, rate of interest is IBLR for 3 months plus 1.5%, minimum 7.5% p.a.

(c) FCNR/ NRE Deposits of our Bank  - 2% over deposit rate or 2% over 3 months IBLR, whichever is higher.

(d) IMD - 0.5% over 3 months LIBOR of the concerned currency, minimum 5% p.a.

 d)      Partly secured advances/ Clean advances
         
 Schemes

i) Overdraft

ii) Demand Loan / Term Loan

iii) Trust Receipt

iv) Bills Purchased/ Discounted

v) Local Cheque Discounting

vi) Issuance of guarantees and documentary letters of credit

Rate of interest:  There is no base fixed by Central Bank of the UAE for advances.  The rate of interest structure is linked to Inter Bank Lending Rate (IBLR) or DIBOR (Dubai Inter Bank Offer Rate) keeping in view security available in the account in the form of cash collaterals/ deposits.  The rate of interest is worked out on weighted average of following:

i) Keeping a spread over the rate payable on deposits upto the amount of deposit under lien.

ii) Keeping a spread over IBLR/ DIBOR for the balance amount (i.e. clean portion).

The local competitive environment, credit rating of the account, value of account, group and other business considerations are also kept in view while fixing rate of interest. 
For bills discounted under L/C, rate of interest is charged as a spread over 3 months/ 6 months/ 12 months LIBOR depending upon usance/amount of bill.  Spread varies from time to time depending upon local market scenario.

  III.    OTHER PRODUCTS AND SERVICES

(a) BOB ATM Services: The UAE territory has replaced its old ATM Controller software with the State of art ATM Controller Switch Open/2 from M/s S2 Systems in the month of September 2004. Subsequently in August 2006, the ATM S2 switch is migrated to Base24. Bank also installed 6 brnahc ATMs and 5 offsite ATMs at Indian High School Dubai, Al Farra Cont. LLC Mezayad and Lulu Departmental stores, Karama Dubai, Sharjah International Aiport, Jafza- Dunai.

(b) Quick Remittance Scheme (QRS) for transfer of money within 48 hours to our selected branches in India at a very nominal cost Minimum Amount: IRS.10, 000/-.
(c)        India Desk at our Dubai Main branch for special services   to NRIs.
(d)        I-BOB internet product for viewing the accounts in major Indian cities – free.
(e)        Issuance of DDs of IRS.50,000/- and above free of charge.
(f)        Courier Service for mailing DDs at customer’s destination in India at nominal charge.
(g)        Special extended evening services from 5.00 p.m. to 7.00 p.m. for remittances to India on all working days.
(h)        Sending the periodical statements of the customer by E-Mail at free of cost.
(i) Tele-banking services for account information.

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Correspondent banks
 FOR USD:
1. FEDERAL RESERVE BANK OF USA : REMIT THE PROCEEDS TO BANK OF BARODA, NEWYORK THROUGH FEDERAL  
   RESERVE BANK OF USA ROUTING NO.02 6005322 FOR FURTHER CREDIT TO BANK OF BRODA DUBAI BENEFICIARY
   ACCOUNT NO…………. NAME………..

2. JP MORGAN, CHASE---CHASE US-33, A/C:544-7-01139, CHIPS No.UID-023035 FOR FURTHER CREDIT TO BANK
   OF BARODA DUBAI BENEFICIARY ACCOUNT NO…………. NAME……….

3. AMERICAN EXPRESS BANK LTD. NEWYORK
 SWIFT ADDRESS : AEIBUS 33,  FAVOURING ACCOUNT NO. 740258 FOR FURTHER CREDIT TO BANK OF BARODA
   DUBAI BENEFICIARY ACCOUNT NO……….. NAME …………

FOR POUND STERLING:
1. REMIT THE PROCEEDS TO BANK OF BARODA, LONDON, SORT CODE: 700804 FOR FURTHER CREDIT TO BANK OF
 BARODA, DUBAI BENEFICIARY ACCOUNT NO………… NAME…………. 

FOR EURO:
1. REMIT THE PROCEEDS TO BANK OF BARODA, BRUSSELS FOR FURTHER CREDIT TO BANK OF BARODA, DUBAI
   BENEFICIARY ACCOUNT NO………… NAME…………. 

FOR JAPANESE YEN:
SWIFT CODE :BOFCJPJT,  CORRESPONDING BANK-UNION BANK OF CALIFORNIA, TOKYO. A/C No.16-139071-1121 FOR FURTHER CREDIT TO BANK OF BARODA, DUBAI  BENEFICIARY ACCOUNT NO………… NAME………….
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SCHEDULE OF CHARGES
 DEPOSIT ACCOUNT                                                                                   (Amt in AED)

 REMITTANCES

 COLLECTION FOREIGN INLAND

 IMPORT LETTER OF CREDIT

 EXPORT LETTER OF CREDIT

 GUARANTEE

 ADVANCES

 MISCELLANEOUS 

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Exemptions /Concessions:

1.       Branch Managers will have discretion for waiver of processing charges upto 50% of the prescribed charges selectively based on the merits of each case.

2. Service charges are waived in case of staff transactions.
3. Territorial Head will have full powers for waiver/reduction in any of the service charges on case-to-case basis.

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CONTACT US

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