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CBO bans prizes on savings deposits from Jan 1

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MUSCAT: The Central Bank of Oman (CBO) has instructed commercial banks in the Sultanate of Oman to end the longstanding practice of offering prizes against savings deposit schemes with effect from January 1, 2022.

The measure came in a circular issued by CBO Executive President Tahir Salim al Amri on Thursday.

Circular 1811 dated December 9, 2021, directs licensed banks to scrap prize schemes while taking steps to enhance interest rates on deposits, among other measures to boost deposit mobilization.

“The Central Bank of Oman, after careful consideration and keeping in view, amongst others, the overall interests of the banking system, and ensure enhanced effectiveness of the monetary policies, has decided to withdraw the ‘Prize Scheme Linked Saving Deposits Schemes’ with effect from January 1, 2022.

Banks, in the interregnum, are advised to develop appropriate savings deposit schemes and fine-tune their funds management strategies to ensure payment of reasonable rates of interest/profit to depositors without raising the lending rates,” Al Amri stated.

Almost all of the major conventional lenders in the Sultanate of Oman presently offer cash prizes against savings deposits as an inducement to customers to deposit their savings with them. These prize schemes have evolved over the schemes to also target women, children and other customer segments. Invariably, prize-linked schemes do not offer any interest on deposits.

According to experts, the timing of the CBO directive means that licensed banks running prize schemes against savings deposits must bring their respective schemes to a complete end before the end of this year.

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