UAE banks raise deposit rates as credit demand rises

UAE banks have intensified competition to attract fresh deposits by offering interest rates of up to 6.25%, amid tightening liquidity and accelerating loan demand, according to a Bloomberg report.

The UAE banks, which had enjoyed ample liquidity for years, supported by capital inflows and an economic boom, are now facing mounting pressure as lending growth outpaces deposit growth, compounded by the fallout from the regional war and withdrawals of some deposits held by non-resident Indians (NRIs).

Credit demand is accelerating, driven by multibillion-dollar infrastructure projects under the "Zero Hormuz" initiative, aimed at developing alternative routes to the waterway, alongside sustained demand for personal loans and financing for government-related projects.

Banks Offer Interest Rates of Up to 6.25% to Attract Deposits

According to the report, First Abu Dhabi Bank (FAB) raised the interest rate on new funds deposited into residents' savings accounts to 5.6% for September–December 2026, up from 4% under its previous offer that expired in August, with no minimum balance requirements or withdrawal restrictions.

Emirates NBD also introduced a promotional interest rate of up to 5.5% on certain large new deposits from October through December, while Mashreq Bank had previously offered a 6.25% rate on savings accounts.

These rates exceed the Central Bank of the UAE's benchmark interest rate of 3.9%, following a 25-basis-point increase in September in line with the US Federal Reserve's decision.

Loan Growth Outpaces Deposits

According to Central Bank of the UAE data, loans rose 18.1% year-on-year (YoY) in Q2 2026, compared with 14% growth in deposits, driven by increased lending to the government and public sector.

This pushed the loan-to-deposit ratio above 80%, compared with around 77.7% in 2025. However, the ratio remains within levels considered comfortable by regulators and below those of some regional peers, including Saudi Arabia.

Naresh Bilandani, Managing Director and Head of Regional Equity Research at Jefferies, said the UAE's monetary base has contracted by approximately 13.5% since the outbreak of the US-Iran war, while credit growth has remained strong, prompting banks to incur higher costs to attract deposits and fund lending.

Meanwhile, Edmond Christou, an analyst at Bloomberg Intelligence, said competition for deposits has intensified as liquidity support measures introduced by the central bank at the start of the war approach expiry. The measures allowed participating banks to cover up to 30% of their cash reserve requirements.

He added that the fallout from the regional conflict could affect capital inflows, reducing the amount of fresh funds entering the banking system compared with last year.

Withdrawals by Non-Resident Indians Add to Pressure

The report noted that withdrawals of some deposits held by NRIs have placed additional pressure on UAE banks' liquidity after India launched a special program to attract US dollar deposits.

Bloomberg cited people familiar with the matter as saying that the bulk of approximately $130 billion in foreign-currency deposits raised through a special facility for Indians living abroad came from the Gulf region, although no country-level breakdown was available.

The sources added that FAB offered financing of up to $1.5 billion to NRIs investing in the program.
Monica Malik, Chief Economist at Abu Dhabi Commercial Bank (ADCB), said banks continue to face strong financing demand, particularly from government-related entities pursuing infrastructure and other projects.