Base Rate FAQs


What is Base Rate?

The Base Rate acts as a minimum profit rate of a Bank and would be applicable to all finances and advances booked on or after May 26, 2016.

Why has the Base Rate been introduced?

The Base Rate system has been introduced to replace the current Lending Rate system, which is the present methodology followed by Emirates Islamic. The introduction of the Base Rate is expected to make pricing more transparent and disclose the Base Rate publicly.

Will all banks have one single/common Base Rate?

No. All banks will not have one single / common Base Rate. Individual Banks will be able to determine any benchmark to arrive at the Base Rate for a specific tenor, as considered appropriate.

How will a Bank decide its Base Rate?

The Base Rate will include those components of lending rates that are common across all categories of borrowers. Banks will determine their actual lending rates on finances and advances (finance profit rates applicable to customers) with reference to the Base Rate and by including other specific charges, as considered appropriate. Base Rate would be applicable to all finances and advances booked on or after April 1, 2016.

Will different tenor of finances have different Base rates?

No. Different finance tenures will not have different Base Rates for Commercial Banking customers.

Will the Base Rate system be applicable to all finances having a floating profit rate?

The Base Rate would serve as a reference benchmark rate for floating rate finance products. Existing finances will continue until maturity, according to the same profit rate methodology at which they were approved. Existing borrowers have the option of approaching the Bank to switch to the Base Rate system before the expiry of their finances. In such cases, these finances will be migrated to the Base Rate system.

How often will the Base Rate change? Will all Banks change their Base Rates at the same frequency?

The change in the Base Rate will be subject to Bank’s review of the factors influencing the Base Rate. Banks are also required to display the information on Base Rate at branches and on their websites.

How will the change in Base Rate impact the floating profit rate of the finance?

Any change in Base Rate will impact the floating profit rate of finances that are referenced to the Base Rate e.g. If the floating profit rate of the finance is 9% (Base Rate =7% + margin = 2%) and the Base Rate rises to 7.5%, the floating profit rate of the finance will increase to 9.5% (Base Rate = 7.5% + margin = 2%) Similarly, a downward movement in the Base Rate will lead to a corresponding decline in the floating profit rate of the finance.

If a customer wishes to transfer his existing finance from another bank to Emirates Islamic, does he have the option to continue at the earlier profit rate methodology?

No. The Base Rate methodology will be applicable to the finance transfer from another Bank to Emirates Islamic, as for Emirates Islamic, this will be a new finance. The floating profit rate of the new finance will be referenced to the Base Rate.

How can a customer know Emirates Islamic’s Base Rate? Will the Base Rate changes be communicated to the customers?

Information on Emirates Islamic’s Base Rate will be displayed on the website and at all its branches. Additionally, any changes in the Base Rate that impact the borrower’s floating profit rate will be communicated to those customers by email, on their email addresses registered with the bank, or vide a letter.

For how long can a customer continue with the original profit rate methodology at which he has taken the finance?

The customer can continue with the original profit rate methodology of the finance until the maturity of the transaction. s

Due to the Base Rate change, what will be impacted, the EMI or the tenure of my existing finance?

The introduction of Base Rate will not affect customer’s current EMI or tenure of the finance, however, customer would be informed in case of any impact on EMI or tenure of the finance.

If a customer has switched to the Base Rate methodology, can he revert back to the earlier profit rate methodology? (i.e., at existing lending rate)

No., once an existing finance account holder has switched to the Base Rate, it will not be possible to revert to the earlier methodology of existing lending rate.

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