UAE banks give thrust to retail banking funds

DUBAI - UAE banks are exploring ways to expand and increase retail banking funds including, personal and credit cards loans and financing of vehicles to raise their interest revenues, according to banks experts and analysts.

By Salah Eldin Eltayeb

Published: Thu 7 Aug 2003, 11:51 AM

Last updated: Wed 1 Apr 2015, 7:46 PM

"Retail banking constitutes the major part of the banks and financial institutions' operations around the globe, hence these institutions are always vigorous to introduce more retail banking components to increase its yields," said Jaffar Al Khoojali, an chartered accountant.

He continued: "High interest rates earned by the UAE banks and the relatively short period of repayments on personal banks have encouraged these banks to expand their personal loans funds in the last few years.

"Banks should not be blamed for facilitating personal loans and help people at emergencies and in the same time get substantial profits, however monetary authorities should intervene to an extent to enforce some stringent norms to organise the financial market."

He added: "It is unfair for the banks to earn more than 16 per cent interest over personal loans, this is very dangerous and it will create lots of unseen problems in the future."

Abdul Rahman Al Ali, Branch Manager RAK bank, said: "The commercial lendings has little profits in the banks total net profits as interest rates fell much below par to encourage more borrowers, therefore the personal loans are much better in terms of marginal revenues.

"Despite the fact that the UAE Central Bank has drawn a clear benchmark interest rate or bank rate, few banks adhere to these rates depending on the demand and market activities. There are many determinants for retail banking in the UAE yet to me the banks are maintaining excellent lending policies both in letter and spirit."

He added: "There is no single fixed interest rate in the market because we have a basket of interest rates depending on the demand and the maturity and risk factor of various financial instruments, for instance commercial loans are much risky than those to governments and personal loans."

Mohammed Bashier, Financial Analyst, Al Madeer Enterprise, said: "Banks have taken a strong step to increase its personal and commercial funds to facilitate loans to people of no other resources. I believe that every mature individual is responsible to his decision to take a loan to buy a property or finance a small enterprise or buy a car."