1% interest ceiling on credit cards - Emirates24|7

1% interest ceiling on credit cards

New rules introduced by the Central Bank last year to regulate personal lending in the UAE apply to credit cards and more regulations on these cards could be announced later, the semi-official daily ‘Al Ittihad’ said on Wednesday.

It quoted a senior Central Bank official as saying banks in the UAE are not allowed to charge credit card holders more than one per cent interest on loans provided to them against those cards.

“The retail loan rules system which was enforced in May last year applies to credit cards regarding the early debt settlement or the maximum interest rates allowed on outstanding debt,” said Saleh Al Tinaiji, director of the banking control and inspection division at the Central Bank.

“Banks are not authorized to charge more than one per cent in interest on outstanding debt on credit cards.”

Alittihad also quoted an unnamed official at the Central Bank as saying a “comprehensive revision” is under way to introduce new rules to regulate the credit cards market. The official gave no other details.

The lending regulations announced by the Central Bank following growing default cases capped personal loans at 20 times a borrower’s monthly salary and stipulated the loan must be repaid within 48 months.

The regulations cover all retail loans including personal, car, housing loans and credit credits. They are intended to control lending activity and excessive charges by banks following public complaints about a surge in bank fees.

Personal loans in the UAE, which has the largest Arab banking sector, had surged by at least 35 per cent during 2006-2008 before they sharply slowed down over the past two years following the 2008 global fiscal crisis and regional debt default problems, according to the Central Bank.

From around Dh109 billion at the end of 2006, personal loans jumped by nearly 39 per cent to Dh148bn at the end of 2007 and by about 54 per cent to Dh228 billion at the end of 2008. Growth plunged to only around 3.9 per cent through 2009, when personal loans ended the year at 237bn.

In 2010, personal loan growth slowed down further to nearly 3.7 per cent as they stood at around Dh246bn at the end of the year.

Comments

Comments