UAE banks lift savings rates as loan growth strains liquidity

UAE lenders are sweetening savings offers in a bid to pull in fresh cash, with rates on some accounts now reaching 6.25%, according to figures reported by Argaam. The move reflects a tightening liquidity environment after years in which Gulf banks could rely on steady inflows of capital.

First Abu Dhabi Bank has lifted its rate on new resident savings deposits to 5.6% for the final four months of 2026, up sharply from 4% previously, with no minimum balance or withdrawal conditions attached. Emirates NBD is running a parallel promotion of up to 5.5% on select large deposits through year-end, while Mashreq had already been offering 6.25% on its savings product.

Argaam reports that lending across UAE banks grew 18.1% year-on-year in the second quarter of 2026, well ahead of 14% deposit growth, pushing the loan-to-deposit ratio above 80% from roughly 77.7% a year earlier. That gap is being driven by government and public-sector borrowing tied to large infrastructure schemes, including projects under the so-called Zero Hormuz initiative to develop alternative trade routes around the strait.

Analysts cited by Argaam point to additional strain from the fallout of the regional conflict involving the US and Iran. Jefferies' Naresh Bilandani noted the UAE's monetary base has shrunk by around 13.5% since the war began, even as credit demand has stayed firm, forcing banks to pay more to secure funding.

Bloomberg Intelligence analyst Edmond Christou, quoted by Argaam, said competition for deposits has sharpened as temporary central bank liquidity support introduced early in the conflict nears its expiry. That facility had let participating banks cover up to 30% of their reserve requirements, a cushion that is now fading.

Compounding matters, non-resident Indian depositors have been pulling funds out of UAE accounts after India launched a special scheme to attract US dollar deposits from its diaspora. Argaam noted that the bulk of roughly $130 billion raised through that Indian facility is understood to have come from the Gulf region, prompting FAB to offer up to $1.5 billion in financing to NRIs participating in the program.

For UK and UAE residents who hold balances in dirhams, or who are weighing whether to convert sterling or other currencies into UAE accounts, the current gap between deposit rates and the central bank's 3.9% benchmark is a factor worth noting when timing any transfer. Higher advertised rates can make holding funds in the UAE more attractive, but the rate on offer is only part of the picture once conversion costs and exchange rate movements are factored in.

Anyone planning to move a significant sum into or out of UAE accounts, whether to take advantage of a promotional savings rate or for a property purchase or business payment, should weigh the transfer costs and prevailing exchange rate alongside the headline interest figure before deciding when and how to send funds.