Uae to Recognise Contractual Interest Rates

A top United Arab Emirates (UAE) banker said a new law would be introduced soon obliging courts to recognise interest rates contracted between bank and borrower.

Sheikh Suroor bin Sultan al-Dhahiri, Chairman of Abu Dhabi Commercial Bank, told reporters after the shareholders’ meeting last night the decree would make interest in debt cases payable at the contracted rate up to the day a case is filed in court.

Subsequently, interest would be charged at a maximum nine pct for personal and 12 pct for corporate loans, he said.

The law, if passed, would mark a breakthrough in solving what UAE bankers say is one of their biggest problems, collecting bad debts in court.

Under current UAE law in all emirates, except Dubai, courts recognise only simple interest at a maximum nine and 12 pct even if a loan was contracted at higher compounded rates.

The Central Bank said last year that roughly a quarter of total loans in the UAE banking system were non-performing. Sheikh Suroor also said a judicial committee set up to consider debt cases would begin functioning within a month.