Banks in Oman to get a major credit boost

Muscat, April 5 – The latest regulatory amendments by the Central Bank of Oman (CBO) will result in an increase in volume of additional credit available to banks in the Sultanate to RO 7.8 billion from the existing RO 5.2 billion.
The amendments, effective from April 1, have been made to reduce the capital adequacy ratio from 12 per cent to 11 per cent, which will result in increasing banks’ lending capacity.
The directives, issued to all licensed banks, are aimed at strengthening the capacity of banks to continue to provide liquidity and grant credit to different projects, thus stimulating economic growth.
The CBO also decided to increase the prudential limit ratio of credit exposure to non-residents and placement of bank funds abroad to banks’ local net worth from 50 per cent to 75 per cent.
This is expected to lead to greater flexibility for banks to manage their liquidity surpluses, diversify revenues and increase their external borrowing capacity to finance local projects of national importance.
In a bid to increase ability of banks to lend, it was decided to expand the deposit base by including
local banks’ deposits, under which the current allowed rate of 87.5 per cent will provide greater liquidity in market and enhance overall credit growth.
As part of its efforts to implement guidelines of the Basel Committee on Banking Supervision, the CBO decided to remove the regulatory restrictions on risk weights to claims on sovereign and central banks.
In order to enable banks to manage liquidity gaps more efficiently, the apex bank decided to increase the prudential limit for all currencies from (-15 per cent) to (-20 per cent) for 3-6 month buckets and negative (-25 per cent) for 6-9 month buckets and 9-12 month buckets.
This will give banks more flexibility to utilise credit lines available to them with foreign
and local correspondents at a reasonable cost. — ONA