02/07/2015 03:27 AST
Personal borrowing in the UAE is again picking up with the amount of loans granted to UAE residents in the first quarter of the year increasing by 6.5 per cent from a year earlier.
In just 12 months, between March 2014 and March 2015, consumers in the UAE pocketed a total of Dh1.3 trillion ($355 billion) in personal loans, according to the data compiled by National Bank of Abu Dhabi (NBAD).
The bulk of the cash assistance or "annualized sum" in banking parlance, around 34 per cent, came from two local banks, Emirates NBD and NBAD, the two biggest lenders at the moment.
The loans from the two banks, combined with those from other home-grown brands, First Gulf Bank and Abu Dhabi Commercial Bank (ADCB), account for more than half (52 per cent) of the total amount of borrowings.
While the numbers are up, personal loan activity in the UAE is still not on par with the pre-global recession period, when banks were not so stringent with loan requests. During the first quarter of 2007 alone, UAE residents were able to bring home a total of Dh503 billion.
“Years ago, it was much easier to get loans but the Central Bank of UAE put some restrictions and banks have become more cautious,” Alp Eke, senior economist at NBAD, told Gulf News.
Following the crisis, the country’s central bank has put in place stricter regulations that let residents borrow no more than 20 times their salary, with the maximum repayment period set for two years
According to the NBAD report, personal borrowings accounted for 30 per cent of the total loans granted by UAE banks.
Banking sector liquidity has improved significantly since the economic downturn in 2008. In June last year, the loan to deposit ratio (LTD) touched a historical low at 87 per cent, but since then the numbers have been growing.
“LTD ratio has been increasing since the last three quarters, mainly because of the decline in government and public deposits. This trend is expected to continue,” the report said.
Gulf News
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