UAE eyes cap on credit card interest rate
Dubai, January 31, 2012
The United Arab Emirates central bank is finalising rules that would cap the interest rate banks charge on credit cards at 18 percent annually to curb bad loans, a report said citing a senior central bank official.
The new rules will be published in February, said the Al Khaleej newspaper report.
The central bank officials were not immediately available to comment when Reuters tried to reach them.
Banks in the UAE, one of the world's top five oil exporters, charge between 27 and 36 per cent a year, much higher than many other Gulf countries, the paper said.
The rate stands at 18 percent in Qatar and Kuwait, while lenders in Saudi Arabia charge between 19 and 24 percent.
In November, provisions for non-performing loans at UAE banks reached a record high of 53.2 billion dirhams ($14.5 billion), up 20 percent since the start of 2011, the latest central bank data shows.
The UAE economy shrank 1.6 percent due to the global financial turmoil in 2009, its worst performance in two decades, as oil prices plunged and a local property bubble burst, straining banks.
Bank lending has remained in low single digits since then with banks hit by a $25 billion debt restructuring of the state-owned Dubai World conglomerate in 2010.
Last December, the central bank said it had approved amendments to liquidity rules for UAE lenders but did not give details.
The exposure of UAE banks to sovereign and private sector debt in crisis-hit Europe is small and their capital adequacy ratio was around 11 percent, Central Bank Governor Sultan Nasser al-Suweidi said in October. - Reuters