The total volume of loans and advances in the UAE fell by 0.2 per cent in July compared to the previous month, as banks rationed credit because of fears over loan defaults, according to the latest figures from the Central bank of the UAE.

The figures show that total loans and advances fell from AED1,009bn ($274bn) in June to AED1,007bn in July. Risk aversion in the UAE banking sector is still high, and most banks are still decreasing their indebtedness.

Bank deposits increased from AED961.7bn to AED964.1bn, bringing the central bank closer to its aim of evening out the imbalance between loans and deposits in the UAE banking system.

In January loans and advances hit AED995.7bn compared to deposits of AED905.7bn.

Total bank assets also rose in July, hitting AED1,496bn, after falling June to AED1,489bn from AED1,498bn in May.