UAE Starting June 1, 2025, several banks operating in the United Arab Emirates will implement a new policy increasing the minimum balance requirement for individual current accounts from Dh3,000 to Dh5,000. This change, reported by Emarat Al Youm and highlighted in Khaleej Times, is set to impact a broad segment of account holders across the country.

Under the revised policy, customers who fail to maintain the new minimum balance of Dh5,000 will incur a monthly fee of Dh25. However, exemptions apply for certain account holders:

• Customers maintaining a total balance of Dh20,000 or more.
• Those with a monthly salary transfer of Dh15,000 or more.
• Account holders with a salary between Dh5,000 and Dh14,999 who also have a credit card, overdraft facility, or loan with the bank.(Khaleej Times)

For individuals not meeting these criteria, the Dh25 fee will apply. Additionally, some UAE banks may charge higher fees, ranging from Dh100 to Dh105, depending on the account type and customer profile.(Gulf News)

Rationale Behind the UAE Policy Change

Financial experts suggest that the increase in the minimum balance requirement is part of a broader strategy by UAE banks to enhance liquidity and encourage customers to engage with additional financial products. By incentivizing customers to maintain higher balances or utilize services like credit cards and loans, UAE banks aim to strengthen their financial standing and customer relationships.

Vijay Valecha, Chief Investment Officer at Century Financial, explained to Khaleej Times that maintaining higher minimum balances helps UAE banks have more funds available for lending and meeting regulatory requirements. He noted that while this move can be economically beneficial for UAE banks, it may pose challenges for certain customer segments.(Khaleej Times)

Impact on Low-Income Account Holders

The policy shift is expected to affect many residents, particularly those with basic salary accounts or limited savings. Financial advisor Dr. Ben Lebig expressed concerns that the new requirement could disadvantage low-income workers, forcing them to either reduce personal expenses to meet the balance threshold or consider taking on credit products to avoid fees.(Khaleej Times)

Dr. Lebig emphasized the need for banks to consider tiered minimum balance requirements based on salary ranges to minimize the impact on vulnerable populations. He also highlighted the importance of financial literacy and planning to help individuals navigate these changes effectively.(Khaleej Times)

Alternative Banking Options

For those who may struggle to meet the new minimum balance, alternative banking solutions are available. Companies can utilize money exchanges or financial institutions as part of the Wage Protection System (WPS) to disburse salaries, offering reliable and cost-effective options for employees earning less than Dh5,000.(Khaleej Times)

Additionally, some financial institutions offer low-cash-balance accounts or digital banking services with zero fees and charges, providing accessible options for individuals seeking to manage their finances without incurring additional costs.(Khaleej Times)

Recommendations for Account Holders

To prepare for the upcoming changes, account holders are advised to:(Instagram)

• Review their current account balances and assess whether they meet the new minimum requirement.
• Explore options for linking credit cards or financing plans to their accounts to qualify for fee exemptions.
• Consult with their banks to understand the specific terms and conditions applicable to their accounts.
• Consider alternative banking solutions if maintaining the new minimum balance is not feasible.

By taking proactive steps and seeking guidance from financial advisors or bank representatives, customers can navigate the policy change effectively and minimize potential financial strain.

Conclusion

The increase in the minimum balance requirement by UAE banks reflects a strategic move to enhance financial stability and encourage greater engagement with banking products. While the policy may offer benefits for the banking sector, it also underscores the importance of inclusive financial practices that consider the diverse needs of all account holders. As the June 1 implementation date approaches, staying informed and exploring available options will be key for individuals to adapt to the new banking landscape.