DUBAI: Capital inflows into the United Arab Emirates, boosted by unrest in Bahrain, brought interbank offered rates to a seven-year low on Monday as liquidity stayed high in the Gulf state's banking sector. Bank deposits in the world's No.3 oil exporter rose in April to their highest level in at least two years. However, UAE banks are still hesitant to lend following Dubai's debt woes and weakness in the property sector. “In the last quarter we have seen a substantial amount of liquidity returning to the region, from Gulf states into the UAE as well as international investors looking for carry,” said Benoit Anne, head of emerging market strategy at Societe Generale in London. “This has led to the fall in EIBOR as interbank dirham liquidity has improved substantially,” he said. The benchmark UAE three-month interbank offered rate was set at 1.633 percent at Monday's fixing, the lowest level since June 2004 and down from Sunday's 1.643 percent. The rate remains, however, well above the Saudi benchmark of 0.659 percent. Before Dubai's debt crisis in November 2009, the rate was 1.915 percent. Deposits at UAE banks stood at AED1.128 trillion ($307 billion) in April, up 2.1 percent from the previous month and 7.5 percent from December. The UAE central bank had been urging banks to bring rates down and increase lending after September's $25 billion debt restructuring deal with Dubai World. UAE private sector credit growth has been anemic, at a mere 2.0 percent in February, compared to annual rates of well over 50 percent in the oil
