The Central Bank of Oman (CBO) has unveiled a raft of policy measures and financial incentives designed to unlock an estimated RO 8 billion in additional liquidity for the benefit of businesses impacted by the economic downturn and the Covid-19 threat.
A circular issued by CBO Executive President Taher Salim al Amri outlines a number of stimulus measures primarily targeted at banks and finance & leasing companies (FLCs) to enable them to extend a measure of financial relief to companies embattled by the crisis.
Most notably, the apex bank cut by half the Capital Conservation Buffers (CCB) for banks from 2.5 per cent of 1.25 per cent. Additionally, the Lending Ratio / Financing Ratio for lenders was increased by five percentage points to 92.5 per cent, up from 87.5 per cent, on the condition that this additional scope be earmarked for lending to productive sectors of the economy, including the healthcare sector.
The Central Bank of Oman also directed banks, finance and finance leasing companies to accept all requests for deferment of loan instalments / interest / profit for affected borrowers, particularly SMEs, with immediate effect for the next six months without adverse impacting the risk classification of such loans. Risk classification of loans pertaining to government projects must be deferred by six months, it stressed.
Furthermore, it urged local banks to consider reducing the existing fees related to various banking services and to avoid introducing any new fees for the duration of 2020.
Significantly, the Central Bank also cut the interest rate on repo operations by 75 basis points to 0.50 per cent, and increased the tenor of repo operations up to a maximum period of three months. The interest rate on discounting of Government Treasury Bills was also cut by 100 basis points to 1.00 per cent. Likewise, the interest rate on Foreign Current SWAP operations was slashed by 50 basis points while the tenor of SWAP facilities was increased up to a maximum of six months.
The rediscounting of Commercial Papers was prescribed as follows: (a) Reduction of the interest rate on rediscounting of a Bill of Exchange and Promissory Note (with two signatures) by 100 basis points to 3.00 per cent; (b) Reduction of the interest rate on rediscounting of Promissory Note with Acceptable Guarantee by 100 basis points to 3.25 per cent, and (c) Reduction of the interest rate on rediscounting of a Promissory Note (accompanied by Trust Receipt) by 125 basis points to 3.50 per cent.
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