MUSCAT: The Central Bank of Oman (CBO) has unveiled a slew of policy measures — the second since March this year — designed to strengthen the ability of banks and Finance & Leasing Companies (FLCs) to support the country’s economic revival.
The new measures, set out in a circular issued by CBO Executive President Tahir bin Salim al Amri (pictured) on Monday, grant a further extension of the timeline for the existing loan deferment scheme, enhance the tenor and limit of the Forex Swap facility provided by the Central Bank, revise the Loan to Value (LTV) ratio for housing loans and allow consideration of a relaxation of the Liquidity Coverage Ratio (LCR) for banks.
“In order to provide further stimulus for economic revival in the context of the prevailing situation and to (enable) banks and FLCs to continue supporting the affected borrowers, the following additional policy measures are announced by the Central Bank of Oman, which would come into force with immediate effect’’, said Al Amri in the circular.
Importantly, as part of the latest measures, the apex bank has extended the validity of its Loan Deferment Scheme, which were unveiled at the onset of the pandemic in March this year, till the end of the first quarter of 2021.
“It has been decided to further extend the availability of the deferment scheme of loans/ instalments/interest for affected borrowers particularly SMEs, without adversely impacting the risk classification of such loans, till March 31, 2021,’’, the Central Bank stated.
Additionally, the maximum limit of the Central Bank’s Forex Swap facility was increased to 100 per cent of a bank’s net worth, up from the current joint ceiling on the Swap and Rediscounting of commercial papers facilites (25 per cent of a bank’s net worth). Further, the tenor of the facility was extended up to a maximum period of one year. The maximum limit for Rediscounting of Commercial Papers facility will remain at 25 per cent of a bank’s net worth, it noted.
Seeking to provide relief to housing loan applicants, particularly first-time buyers of housing property, the CBO decided to reduce the Loan to Value (LTV) margin for housing loans to 10 per cent, down from the existing requirement of 20 per cent. This measure, it stressed however, is permitted only in respect of first-time home buyers of residential properties for own purposes. Nevertheless, banks are permitted to include the cost of registration and insurance in the value of the housing property while computing the LTV in respect of all housing loans, it said.
Finally, on the issue of Liquidity Coverage Ratios (LCR), the Central Bank affirmed that the minimum standard currently remains unchanged at 100 per cent for LCR. “However, in case of genuine liquidity stress faced by a bank, the Central Bank of Oman may consider relaxation, on a case by case basis, by allowing the bank to temporarily operate below the minimum LCR requirement of 100 per cent but not less than a minimum LCR of 75 per cent’’, Al Amri said, adding that the relaxation facility is likely to be available until March 31, 2021.
The latest initiatives come just under six months since the Central Bank announced 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.