Dubai: People’s borrowings are still on the rise in the UAE, but the amount of bad debts – the ones that are left unpaid by delinquent borrowers – is decreasing, thanks to stringent measures imposed by banks in the country.

As of June 2015, UAE residents borrowed a total of Dh1.178 trillion from ten major banks in the country, up from Dh918 billion in the same period last year.

While loans are growing at an “alarming rate”, the non-performing loan (NPL) ratio, the amount of bad credit over total loans, dropped from 7.59 per cent in December 2011 to only 4.21 per cent in June, according to the data compiled by the National Bank of Abu Dhabi (NBAD). That's about Dh45 billion out of the total loans.

Alp Eke, director and senior economist at the NBAD economic department, said the numbers, though they represent only ten banks in the UAE, clearly illustrate that the amount of bad debts incurred by the country’s lenders have reduced in size.

The trend is largely due to the number of UAE regulations that promote prudent borrowing or lending practices. The UAE’s Al Etihad Credit Bureau has been set up to compile all the necessary data for borrowers in the country.  The Central Bank of the UAE has also recently set up new regulations on liquidity risk management for banks, which are in line with the Basel Committee for Banking Supervision recommendations.

“The absolute size of bad debts and the NPL ratio is decreasing because of many factors, mainly because of new regulations by the Central Bank, Basel compliance requirements and improving economy,” Eke told Gulf News.

In the last few years, thousands of residents in the country were caught in mounting loans and credit card debt. Eke said the recent decline in non-performing loans is not because UAE residents have become more responsible with their loan repayments.

“Actually, it is the lenders and regulators who have become more careful. The new regulations and compliance requirements are helping. Credit bureau has recently been established, consumer data is being compiled. Lenders are becoming more systematic in their decisions,” Eke said.

“I don’t think UAE borrowers have learned the lesson. The common consumer has short memory and doesn’t think long term. It is mainly because of careful or more systematic lending methodologies and stricter regulations.”

The  loans data are for the UAE's top banks: Emirates NBD, NBAD, First Gulf Bank, Abu Dhabi Commercial Bank, Union National Bank, Mashreq Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, National Bank of Ras Al Khaimah and Commercial Bank of Dubai.