UAE caps credit card charges

UAE charge between 27 and 36% a year for credit card use Dubai - Arabstoday The UAE Central Bank is finalising rules that would cap the interest rate banks charge on credit cards at 18 per cent annually to curb bad loans, according to a newspaper report on Tuesday.he new rules will be published in February, the Al KhaleejT newspaper reported,citing a senior Central Bank official. Central bank officials were not immediately available to comment when Reuters tried to reach them. Banks in the UAE charge between 27 and 36 per cent a year, much higher than many other Gulf Arab countries, according to the paper. The rate stands at 18 per cent in nearby Qatar and Kuwait, while lenders in Saudi Arabia charge between 19 and 24 per cent. The global credit crunch of 2008-2009 exposed lending excesses in the UAE where many enjoy lavish lifestyles, splurging tax-free pay on luxury cars and villas. In November, provisions for non-performing loans at UAE banks reached a record high of Dh53.2 billion ($14.5 billion), up 20 per cent since the start of 2011, the latest central bank data shows. The UAE economy shrank 1.6 per cent due to the global financial turmoil in 2009, its worst performance in two decades, as oil prices plunged and a local property bubble burst, straining banks. Bank lending has remained in low single digits since then with banks hit by a $25 billion debt restructuring of the state-owned Dubai World conglomerate in 2010. Last December, the central bank said it had approved amendments to liquidity rules for UAE lenders but did not give details. The exposure of UAE banks to sovereign and private sector debt in crisis-hit Europe is small and their capital adequacy ratio was around 11 percent, Central Bank Governor Sultan Nasser Al Suweidi said in October. Foreign bank claims in the Gulf Arab region stood at $323 billion in June 2011, or about 29 percent of the regional economic output with the UAE showing the highest levels, Deutsche Bank said in a report earlier this month. Analysts polled by Reuters in December expected the $297 billion UAE economy to expand by 3.9 per cent in 2011, before slowing down to 3.1 per cent this year on a weaker global growth.