Abu Dhabi: A leading businessman has cautioned local banks that increasing the cost of borrowing on previous and new loans under the pretext of the global financial crunch will have repercussions.
Saeed Al Ka'abi, Member of the Board of Directors of the Abu Dhabi Chamber of Commerce and Industry (ADCCI) and Chairman of Ascorp Holdings, said: "Banks are dispatching letters to customers regarding increment of interest rates on old and new loans by 7- 17 per cent.
"This is concocted by banks to reap lucrative gains from the global financial crisis at a time when all need to joint hands to immunise the national economy from potential reverberations of the crisis."
Al Ka'abi reiterated that increasing interest rates by a big margin despite availability of liquidity with banks and the liquidity provided recently by the government is "unjustifiable and mars the developmental process in the components of the national economy".
He added that this attempt is contrary to the measures taken by the banks in other countries, where profit on loans was reduced to alleviate negative effects of the financial crunch.
"Even if the increment of interest rate on new loans is somewhat justified, why should the interest rate and crediting cost on the previous loans be increased," said Al Ka'abi.
He noted that local banks do not face a liquidity crunch as they have used only Dh25 billion out of the Dh120 billion offered by the government to meet the credit crisis.
Al Ka'abi urged the central bank to prevent any interest hike on old loan contracts because they were signed in the past.
He also urged banks to offer finance to small and medium enterprises.
