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Credit Agreement Letter for United Arab Emirates

Credit Agreement Letter Template for United Arab Emirates

A Credit Agreement Letter is a formal document issued by a UAE-licensed financial institution that outlines the terms and conditions of an approved credit facility. The document must comply with UAE Federal Laws, UAE Central Bank regulations, and where applicable, Sharia principles. It details the credit amount, tenure, interest/profit rates, repayment terms, security requirements, and borrower obligations. The letter serves as a binding agreement once accepted by the borrower and must include all mandatory disclosures required by UAE banking regulations, including fees, charges, and key fact statements for retail banking products.

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What is a Credit Agreement Letter?

The Credit Agreement Letter is a crucial document used in the United Arab Emirates banking sector to formalize credit facility arrangements between financial institutions and borrowers. It is typically issued after a successful credit application and internal approval process, serving as both an offer letter and, upon acceptance, a binding agreement. The document must strictly adhere to UAE Central Bank regulations, including maximum interest rate caps, fee structures, and mandatory disclosures. For retail banking products, it must include a Key Fact Statement as per regulatory requirements. The letter can be used for various credit facilities including term loans, overdrafts, or working capital facilities, and may be structured as either conventional or Islamic financing, the latter requiring additional provisions to ensure Sharia compliance.

What sections should be included in a Credit Agreement Letter?

1. Letter Header: Bank's letterhead, date, reference number, and addressee details

2. Salutation: Formal greeting to the recipient

3. Subject Line: Clear indication that this is a Credit Agreement Letter with reference to any application numbers

4. Opening Paragraph: Reference to the credit application and confirmation of approval

5. Facility Details: Type of credit facility, amount, currency, and purpose

6. Key Terms: Interest rate/profit rate, tenure, repayment schedule, and processing fees

7. Conditions Precedent: Prerequisites that must be fulfilled before the facility becomes effective

8. Security Requirements: Details of any collateral, guarantees, or security documents required

9. Covenants: Key obligations and restrictions on the borrower

10. Events of Default: Circumstances that would constitute a default under the facility

11. Closing Instructions: Instructions for acceptance and return of the letter

12. Signature Block: Bank authorized signatories' details and space for customer acceptance

What sections are optional to include in a Credit Agreement Letter?

1. Islamic Finance Provisions: Required if the facility is Sharia-compliant, detailing the Islamic structure used

2. Insurance Requirements: Include if specific insurance coverage is required for the facility

3. Draw-down Procedures: Required for facilities with multiple draw-down options

4. Special Conditions: Any customer-specific conditions or requirements

5. Cross-Default Provisions: Include if the facility is linked to other banking facilities

6. Currency Provisions: Required for facilities in foreign currencies

7. Tax Provisions: Include if specific tax considerations apply to the facility

What schedules should be included in a Credit Agreement Letter?

1. Schedule 1 - Facility Summary: Detailed breakdown of the facility terms, limits, and pricing

2. Schedule 2 - Fees and Charges: Comprehensive list of all applicable fees and charges

3. Schedule 3 - Repayment Schedule: Detailed payment schedule with dates and amounts

4. Schedule 4 - Security Details: Detailed description of security/collateral requirements

5. Appendix A - Required Documents: List of documents required for facility activation

6. Appendix B - Standing Instructions Form: Form for setting up automatic payments if required

7. Appendix C - Key Fact Statement: As required by UAE Central Bank regulations for retail banking products

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions








































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Relevant Industries

Banking & Financial Services

Real Estate & Construction

Retail & Commerce

Manufacturing & Industrial

Healthcare

Technology & Communications

Education

Hospitality & Tourism

Transport & Logistics

Energy & Utilities

Professional Services

Media & Entertainment

Relevant Teams

Legal

Finance

Treasury

Credit

Risk Management

Compliance

Corporate Banking

Islamic Banking

Operations

Customer Service

Business Development

Documentation

Retail Banking

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Credit Manager

Relationship Manager

Legal Counsel

Compliance Officer

Risk Manager

Corporate Banking Manager

Financial Controller

Business Development Manager

Managing Director

CEO

Company Secretary

Accounts Manager

Islamic Banking Officer

Credit Analyst

Branch Manager

Industries










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