UAE banks are raising savings offers as lending grows faster than deposits. In August, credit rose 2.6% month on month, against a 0.7% increase in deposits.
In August, gross lending added AED72.4 billion, while deposits grew by just 0.7%. Banks are offering sharply higher returns to draw in funds: First Abu Dhabi Bank is advertising up to 5.6% on eligible new savings, while Emirates NBD has offered up to 5.5% on some larger new deposits. The gap between lending and deposit growth is putting a price on funding as banks have less liquidity to draw on.
These offers reflect pressure from strong lending, weaker inflows and the repayment of central-bank liquidity support. Savers who meet the terms may earn more, while banks face a higher cost of financing credit growth. Bloomberg described the wider market trend in October as intensifying competition among UAE banks for deposits as lending growth tightened liquidity.
A widening funding gap
Central Bank of the UAE figures reported on October 5 show gross bank lending rose by AED72.4 billion, or 2.6%, in August to AED2.8714 trillion. Deposits increased by 0.7% over the month, reaching AED3.5348 trillion. By the end of August, lending was 18.8% higher year on year. Deposits were up 13%. These figures offer a newer snapshot than the second-quarter comparison, when lending was reported up 18.1% year on year and deposits by about 14%. The reported balances imply a simple gross credit-to-deposit ratio of about 81.2%. That calculation is not necessarily identical to the regulator's defined liquidity ratios.
Deposit growth varied by source. Resident deposits rose 1.0% in August to AED3.2293 trillion. Government deposits increased 3.5% to AED461.1 billion, while private-sector deposits grew 0.7% to AED2.3615 trillion. Non-resident deposits stood at AED305.5 billion. Savings deposits reached AED427.9 billion, up about 13.7% from AED376.5 billion a year earlier. Quasi-monetary deposits increased 22.6%. Aggregate growth alone does not show how readily funds are available to meet new lending demand.
Public-sector and government-related borrowing has been a major driver. Demand for personal loans has continued as well. Monica Malik, chief economist at Abu Dhabi Commercial Bank, has pointed to a strong pipeline of credit requests, including from government-linked entities carrying out infrastructure projects. The source material connects some of that demand to the "Zero Hormuz" initiative, which aims to bypass the vital waterway through major infrastructure investment.
Pressure is also visible in the three-month Eibor, the benchmark rate for lending between UAE banks. Its spread against US interest rates had been negative for much of the previous two years. It rose after the regional war began in late February. That shift signals tighter local funding conditions, not the promotional savings rate available to an individual customer.
What banks are offering
First Abu Dhabi Bank's offer pays residents up to 5.6% on new money placed in savings accounts from September to December 2026. The offer states no minimum balance or withdrawal restrictions. That is up from 4% in its previous promotion, which ended on August 31. Emirates NBD, Dubai's largest bank, has offered up to 5.5% on some larger new deposits in a three-month promotion running from October to December. Mashreq has previously advertised a 6.25% savings rate, so high promotional returns predate the latest campaigns.
These are promotional deposit rates, not the UAE's policy rate. In September, the Central Bank of the UAE raised its base rate by 25 basis points to 3.9%, following the US Federal Reserve as the dirham is pegged to the dollar. The peg limits day-to-day exchange-rate movement against the US currency. Interest-rate decisions still affect the cost of dirham funding. Banks use higher advertised offers to compete for deposits, but eligibility and campaign terms determine what a customer can actually earn. The Central Bank of the UAE publishes monetary and regulatory information through its official website.
Emirates NBD Egypt's corporate cash-management tools address business needs beyond funding. They focus on helping companies manage payments and trade finance. That is a separate operational challenge from securing deposits, though both reflect how business demand affects bank balance sheets and services.
Liquidity under strain
Naresh Bhandari, Jefferies' managing director and head of regional equity research, said the UAE's monetary base had contracted by about 13.5% since the US-Iran war began. August data show a partial monthly recovery: the monetary base rose 4.2% to AED825.9 billion. Separately, liquid balances held by banks and other financial corporations in current and overnight accounts at the Central Bank of the UAE jumped 66.9% in August to AED156.1 billion. Those monthly increases do not establish that the earlier contraction has been fully reversed. Bhandari attributed funding pressure to the earlier contraction coinciding with brisk credit growth, supported by public-sector capital spending and personal borrowing.
The banking system has continued to grow. At the end of August, UAE bank assets reached AED5.741 trillion, up 12.9% year on year. Banks' net foreign assets rose 18.6% to AED832.6 billion. That is a balance-sheet measure, not evidence of a specific dirham exchange-rate move or a change to the currency peg. Meanwhile, the share of non-performing loans declined to 2.6%, with the net non-performing loan ratio at 1.2%.
Another source of pressure is the withdrawal of funds by non-resident Indians. Bloomberg News reported that people familiar with the matter said most of the roughly $130 billion in foreign-currency deposits placed through a special facility for Indians living abroad came from the Gulf. UAE banks participated in the scheme. First Abu Dhabi Bank offered up to $1.5 billion in financing for non-resident Indians investing in it. The UAE is home to a large Indian community and is a major remittance corridor, but available information does not break the deposits down by country or quantify how much left UAE banks.
India's separate programme to attract dollar deposits adds to the competition for those funds. Bloomberg Intelligence analyst Edmond Christou has also said the regional conflict may be reducing new capital inflows compared with the previous year. Banks face the scheduled repayment of central-bank liquidity support announced at the start of the war. Lenders had been able to use those facilities to cover as much as 30% of cash reserve requirements. The measures were due to end in September.
Who bears the cost
Higher deposit offers help banks compete for cash, but they do not guarantee that new money will arrive. Bhandari has noted that attracting fresh corporate deposits may be difficult when companies need more working capital after the war. If business funds are less available and inflows weaken, lenders must compete harder for a narrower pool of savings. Bloomberg's October reporting likewise described banks seeking new deposits amid faster credit growth and tighter liquidity.
The central-bank rate and a bank's deposit offer are different measures. The base rate follows the UAE's dollar peg and moves in line with the Federal Reserve's decision. An individual bank sets its promotional savings rate to attract eligible deposits. That offer can exceed the policy benchmark without changing the peg or signalling a general rise in returns across every account. Bloomberg's account of the deposit-rate competition is available in its October market report.
August's 2.6% monthly increase in lending alongside 0.7% deposit growth captures the funding imbalance, even as some liquidity indicators rebounded during the month. Promotional rates may benefit savers who meet the terms. For banks, the higher offers raise the cost of financing continued credit growth.
