Why Merchant Navy Officers Struggle To Get Personal Loans

A personal loan has become a popular way for seafarers in India to finance individual and emergency expenses, such as travel, wedding costs, home improvements, and extra funds during emergencies. Merchant navy officers earn a high income and can maintain a good repayment track record.

However, the unusual terms of their employment can create some roadblocks to the smooth processing of a personal loan request. Being aware of these issues may make the personal loan journey easier and help avoid delays.

Submit the proof of Employment continuity.

 Seafarers and officers of the merchant navy work on contracts lasting 6 to 8 months. After completing their contracts, which involve sailing for extended periods and infrequent shore visits, they are entitled to a well-deserved break of 3 to 4 months. This break may be misunderstood by lenders, who might assume the applicant will be unemployed during this time and may doubt their ability to meet financial commitments.

• To address the Banks’ concerns about the break period, during which the applicant does not receive any remuneration, the applicant can provide additional proof and records of past and further re-employment.
• Additional documents include a contract letter for the past two years and a letter from the company confirming that a future contract can be submitted when applying for a personal loan. 

 The amount of Salary received by the applicant.

 The salaries of merchant navy applicants working with a foreign company are credited to the NRI account, allowing funds to be deposited in a foreign currency. The applicant receives remuneration for the duration of the contract. Banks will average the total funds received over a year to determine the monthly income. 

• The average monthly income over the year must exceed ₹100,000, as per the HDFC Bank policy. ICICI Bank requires a net salary credit of ₹ 140,000 per month.
• The Bank considers the average salary from the last contract while processing the personal loan. The amount received in foreign currency must translate into the monthly average required after conversion.

 Applicants may receive irregular salary transfers.

Merchant Navy employees receive their salary from the employer in accordance with the terms of the contract. The company can credit the salary monthly or quarterly. Some organisations allow applicants to draw funds as required against the salary credits and settle accounts after the contract ends, and they leave the ship. Systematic salary transfers and receipts may vary according to the terms of the contract.

Unconventional salary credits can leave the bank uncertain, as regular salary transfers to the account are required under personal loan rules. 

• In such circumstances, the applicant can submit the contract or appointment letter that gives the details and breakdown of remuneration paid.
•  Lenders that process personal loans for Merchant Navy applicants, such as HDFC Bank and ICICI Bank, are familiar with such transactions and consider the applicant’s total net earnings of the contract period.

Official confirmation and verification of employment.

As part of the personal loan process, banks verify employment and document validity by contacting the company’s HR or administrative officers. If a foreign company employs the applicant without a local office in India, communication may be challenging.

• Since visiting the office is not possible, the applicant can request a verbal communication by phone at a mutually convenient time, taking into account the time difference between the two locations. 
• An email from the officer in charge’s official email ID, confirming employment details, can also serve as confirmation from the company.

Requirement for Residence ownership.

Policy requirements for HDFC Bank include that the applicant has a self-owned residence, as a merchant navy member is away on the high seas for most of the year, and self-owned residence ownership is mandatory.

Documentary proof of self-owned residence is mandatory. The acceptable documents for residence proof are as follows:

• A utility bill, such as the water or electricity bill, for the past three months.
• Ownership documents and a copy of the registry of the property.

Further documents are required to apply for a personal loan.

To apply for a personal loan from ICICI Bank for employees of the merchant navy, applicants must submit the required documentation. The documentation required is more extensive due to the unusual job profile of a merchant navy applicant.

The extra documents besides the KYC and income documents are:

• Continuous Discharge Certificate, or the CDC, as it is popularly known, is a mandatory document issued to all seamen. A copy of the CDC is required for a personal loan, as it serves as proof of identity and contains details of all voyages or contracts of an employee at sea.
• All Indian citizens need a passport to cross Indian borders and travel abroad. Merchant Navy employees require a valid passport because they will be sailing to foreign ports. The immigration stamp on the passport also serves as proof that the employee has left India, joined the vessel, and returned.
• A valid contract letter for the next voyage, confirming further employment by the company. A letter confirming that the applicant will rejoin the ship after a break period allowed upon completion of the present voyage as an engineer or deck officer.
• Merchant navy employees applying for a personal loan with HDFC Bank are required to submit physical copies of self-attested documents with the application request.

Only select Banks process a personal loan for merchant navy employees.

Personal loans are unsecured; not all Banks and NBFCs will process personal loans for seafarers. HDFC Bank and ICICI Bank are the primary lenders that issue personal loans up to ₹ 40 lakhs to merchant navy officers who meet the salary criteria.

• Banks will process personal loans for merchant navy officers. Seamen looking for a personal loan can apply to the bank as account holders with good balances.
• Applicants in need of funds can apply for a loan against property or a gold loan, both of which are easily accessible and secured.

The best time for an applicant to apply for a personal loan is soon after the contract is completed. This is when all required documents are readily available to the applicant, allowing them to complete the formalities before rejoining a ship for the next contract and returning to employment.