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Drop in Eibor yet to benefit consumers

Banks fail to pass on reduction in cost of funding. (EB FILE)

By Shveta Pathak

Even as banks in the country are enjoying the benefits of a substantial drop in the cost of their funding, with the Emirates Inter-Bank Offered Rate (Eibor) witnessing a decline in the second half of 2009, they are yet to pass on such gains to end-consumers.

The three-month Eibor, which was hovering around 4.8 per cent in October 2008, has eased in the past months, particularly in response to monetary policies of the Central Bank.

The three-month Eibor, which was 2.3 per cent in the first week of August, was down to 1.8 per cent at the end of December 2009, according to Central Bank statistics. The six-month Eibor dropped to around 2.1 per cent in December.

However, borrowers can look forward to cheaper credit if banks decide to pass on the benefits of cheaper funding, experts say. Although Eibor is used as a benchmark by most banks, especially for mortgage rates, of late many banks have moved to their own benchmarks, known as prime rates or base rates.


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