CBO unveils RO8bn worth of liquidity package to stimulate economy

March 18, 2020

The Central Bank of Oman (CBO) on Wednesday announced up to RO8bn worth of package of incentives and measures for the financial institutions to counter the economic fallout of the coronavirus in the sultanate.

The action by the CBO to stimulate the national economy follows the similar moves by the central banks across the GCC region.

'The CBO issues a package of incentive and precautionary measures that are expected to provide additional liquidity available in the range of RO8bn in order to contain the repercussions of the current conditions on the performance of the national economy,' Oman News Agency said in a tweet.

The measures taken by the CBO include: reducing the requrement for capital buffers, raising lending ratios, deferement of loan installments/interest for affected borrowers (particularly SMEs) for six months, reducing fees related to various banking services, and reduction of interest rate on repo operations. The central bank emphasised to facilitate lending in sectors which are affected by the current economic conditions, including healthcare, travel and tourism.

In a circular issued to the licensed banks and finance and leasing comapnies (FLCs) operating in Oman, the CBO directed these financial institutions to respond to its requests and implement the measures.

For the purpose of supporting the banking sector and FLCs to overcome the prevailing economic conditions, the CBO has decided to take the following measures from the issuing date:

  • To lower the Capital Conservation Buffers (CCB) by 50 per cent from 2.5 per cent to 1.25 per cent.
  • To increase the lending ratio/financing ratio by 5 per cent from 87.5 per cent to 92.5 per cent and to utilize the additional scope provided for lending/financing to productive sector of the economy including healthcare services.
  • To accept requests for deferment of loan installments/interest/profit for affected borrowers, particularly SMEs, with immediate effect for the coming 6 months without adversely impacting the risk classification of such loans.
  • Deferring the risk classification of loans pertaining to government projects for the period of 6 months. This, in reference to CBO circulars that were issued earlier.
  • To consider reducing existing fees related to various banking services and to abstain from introducing new ones during year 2020.
  • Reduction of the interest rate on Repo operations by 75 basis points to 0.50 per cent, and increase in the tenor of Repo operations up to a maximum period of 3 months.
  • Reduction of the interest rate on discounting of government treasury bills by 100 basis points to 1.00 per cent.
  • Reduction of the interest rate on Foreign Currency SWAP operations by 50 basis point, and increase the tenor of SWAP facility up to a maximum period of 6 months.
  • Re-discounting of Commercial Papers as follows:

a) Reduction of the interest rate on re-discounting of a Bill of Exchange and Promissory Note (with 2 signatures), by 100 basis points to 3.00 per cent.

b)  Reduction of the interest rate on re-discounting of a Promissory Note with Acceptable Guarantee, by 100 basis points to 3.25 per cent.

c) Reduction of the interest rate on re-discounting of a Promissory Note accompanied by Trust Receipt, by 125 basis points to 3.50 per cent.

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