By Ron Askew
Bank board reviews a proposal for amending interest rates and regarding provisions.
The UAE central bank said on Thursday it has asked banks operating in the Gulf Arab state for feedback on a proposed change to interest rates and charges on personal loans.
"The board reviewed a proposal for amending interest rates and charges on personal loans in addition to charges and commissions charged against services rendered to individual customers, and the board decided to seek banks opinions on the system," statement said after the bank board met in Abu Dhabi.
The board also looked into a "proposal regarding provisions for loans, interest in suspense and investment provisions," it said, adding that it would also seek the opinion of the industry.
It did not give details about the proposed amendments.
The UAE lowered overnight repurchase rate by 50 basis points to one percent in January following a series of measures meant to shield the banking system and the economy from the crisis. (Reuters)For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Does this mean that the interest rates can go down? This would really help the mortgage owners.
If the central bank revised its interest rate it does not necessarily mean that this downward revision would be passed on to the end-user e.g. the mortgage owner. The banks lend between themselves on eibor and that effects the end-user rate. The banks need to reflect the possible downward revision by the Central Bank in their eibor i.e. their lending to each other (which is one aspect of opportunity cost for them), and therefore only then would the end-use/mortgage owner be assisted. I hope this explains it.
End customers never get the benefit of any reduction in rates by the Central Bank. Millions of dirhams lying in millions of retail/salary accounts are not paid interest of any sort. Interest rates are already so high and credit terms are made easy to make the customer pay more interest(like nil DP for a new car but higher interest). Banks will never react positively to this query. Actually the UAE Central Bank should ask the feedback of the public about the charges of banks. This will give them a clear picture of how angry the public is at the rates offered by the banks here.