ABU DHABI: Most of the interest rates offered by UAE banks rose on Sunday as the central bank introduced a new system for its account in an effort to bring greater transparency and more accurate market conditions.
The three-month rate rose to 2.43820 percent from 2.38683 percent on Thursday, while a general interest rate jumped to 3.03998 percent from 2.93767 percent. But overnight interest rates fell to 1.36775 percent from 1.50500 percent.
The inter-bank interest rate, which is used in many financial transactions in the UAE, is calculated daily for overnight periods. Bankers say that interbank transactions at that price rarely exceed their monthly deadlines in actual practice.
The new system reduces the number of banks that use their interest rates to eight out of 10 banks and increases pressure on banks to state their reasons for each price.
The central bank encourages banks to put more transactions and counterparties into account when offering prices than to deal with older clients who may lend them relatively cheaply.
This means the new system could raise interest rates among UAE banks, but bankers said the impact was likely to be limited because some banks had already extended their indicative price points weeks before the system was introduced. (inputs from reuters also)