Bank lending in the UAE continued to increase in May, though at a slower pace, despite coronavirus impacting most of the sectors of the economy.

Gross credit increased by 0.1 per cent or Dh2.2 billion month-on-month from Dh1,776.1 billion at the end of April 2020 to Dh1778.3 billion at the end of May 2020, the UAE Central Bank said on Wednesday.

It was the third consecutive month of increase in domestic lending in the UAE, reflecting that the banks continue to lend even during these tough times to those customers who have good track record and are backed by solid business models.

There is plenty of liquidity in the market following the stimulus package announced by the UAE Central Bank. By mid-May, banks in the UAE had drawn down 77 per cent of the Dh50 billion liquidity facility made available with them to offset the impact of Covid-19.

The UAE Central Bank has announced several measures to reduce the impact of Covid-19 on the domestic economy. It reduced lending rates to 0.75 per cent and is offering interest free loans worth up to Dh50 billion to banks, as a relief measure for providing liquidity to individuals and SMEs.

Banks' gross assets, including bankers' acceptances, grew by 0.3 per cent from Dh3,155.7 billion in April 2020 to Dh3,165.7 billion in May 2020.

But total deposits decreased by Dh6.7 billion, attributable to Dh7.5 billion reduction in non-resident deposits, dominating a Dh0.8 billion increase in resident deposits.

Money supply

Money supply aggregate M1, which includes currency in circulation outside banks and monetary deposits, increased by Dh4 billion or 0.7 per cent, from Dh560.3 billion at the end of April 2020 to Dh564.3 billion at the end of May 2020. The increase in M1 was due to Dh2.2 billion increase in currency in circulation and Dh1.8 billion increase in monetary deposits.

The money supply aggregate M2, which includes, M1 plus quasi-monetary deposits, decreased by 0.9 per cent, from Dh1,464.8 billion in April 2020 to Dh1451.9 billion last month. The decreased is attributed to Dh16.9 billion reduction in quasi-monetary deposits.

While mosey Supply aggregate M3, which includes M2 plus government deposits at banks as well as at the Central Bank, also decreased by 0.2 per cent, from Dh1,751.5 billion in April 2020 to Dh1,747.8 billion in May 2020.

 

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