Banks' loan-deposit gap widens to $16.1b

Dubai : UAE banks' overall loans exceeded deposits by Dh59.2 billion ($16.1 billion) in February, rising from Dh47.1 billion in January, underscoring a shortage of money in the banking system.

Overall bank loans rose 0.2 per cent in February from January to Dh1.02 trillion, while bank deposits fell one per cent over the same period to Dh958.3 billion the central bank reported on its website yesterday. Specific provisions for bad loans by banks climbed to 3.16 per cent of gross loans in February, rising from 2.05 per cent a year ago, the data showed.

The three-month Emirates interbank offered rate, the rate banks charge each other for three month loans, has risen 34 basis points this month to 2.2888 per cent, the highest in more than seven months. The 12-month interbank rate has gained 24 basis points in February to 2.66125 per cent.

UAE banks have faced a shortage of money since the onset of the global credit crisis, forcing the central bank to announce a Dh50 billion credit facility for banks in 2008 and injecting Dh50 billion of deposits in local banks.