October, 21, 2025
The Federal Supreme Court has reaffirmed that financial institutions in the UAE are prohibited from charging interest on accumulated or compound interest, and that total interest payable must not exceed the original value of the loan.
The ruling came as the country’s highest court overturned a previous appellate judgment that had ordered a borrower to pay Dh1.553 million on a loan originally valued at Dh700,000, and sent the case back to the Court of Appeal for reconsideration.
The dispute began when a bank filed a lawsuit seeking Dh1.919 million plus 11.25% annual interest, alleging that the borrower had defaulted on two facilities — one for Dh634,000 and another for Dh66,000.
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