The Central Bank of Oman has announced a comprehensive stimulus package to inject additional liquidity of more than RO8 billion ($20.78 billion) to the sultanate’s economy.
It has also issued elaborate instructions to all banks, exchange companies and FLCs in light of the prevailing economic conditions.
As part of the announcement, CBO has reduced the capital conservation buffer by 50%, from 2.5% to 1.25%. Similarly, CBO has raised the lending ratio by 5% from 87.5% to 92.5%, and has emphasized banks focus on those most affected by the current conditions.
The measures announced by CBO are expected to ease many of the existing regulatory restrictions, including accepting with immediate effect requests by affected borrowers for deferment of loan installment payments for the next six months, particularly for SMEs. The measures are applicable to all borrowers including those executing government owned projects.
The CBO measures also propose adjustments to the prices of open market tools in order to inject more liquidity in the local market. For example, interest rate on repo operations was reduced by 75 basis points to 0.50%, and the maximum period of repo operations was raised up to maximum period of three months.
In addition, there is lowering the interest rate on government treasury bills by 100 basis points to 1%, and lowering the interest rate on foreign exchange swaps by 50 basis points, and raising the maximum period for currency swaps up to maximum period of six months. The stimulus package also includes a reduction in the price of re-discounting of commercial paper by 100-125 basis points, CBB said.
Furthermore, in order to provide licensed banks with enhanced opportunities to invest their surplus funds beyond the stipulated lending ratio limit, it has been decided to raise the maximum permissible limit on investment in the sultanate Sovereign Development Bonds (GDB) and Sukuk from 45% to 50% of a bank’s net worth with immediate effect.
CBO’s instructions to the banking sector also point out the urgent need for all stakeholders to be fully ready to handle any increase in the demand for financial and banking services. The banking sector should encourage their customers to use online banking services and promptly inform them, if there are any changes with regard to the availability of their services.
The circular underlines the need for banks, exchange companies and FLCs to be vigilant on ensuring cybersecurity, assess potential risks, put in place risk mitigations and conduct awareness campaigns for customers if necessary.
TradeArabia News Service