PRECAUTIONS TAKEN TO LIMIT COVID-19 IMPACT

MUSCAT: The Central Bank of Oman (CBO) issued a number of directives to all licensed banks and financing leasing companies (FLCs) operating in Oman that is expected to provide additional available liquidity in a range of OMR8 billion, to overcome the prevailing economic conditions.

In the light of the current economic situation being affected by the ongoing global coronavirus (COVID-19) pandemic, CBO’s incentive measures included lowering the Capital Conservation Buffers (CCB) by 50 per cent from 2.5 per cent to 1.25 per cent, increasing the Lending Ratio/ Financing Ratio by 5 per cent from 87.5 per cent to 92.5 per cent and to utilise the additional scope provided for lending/financing to productive sector of the economy including healthcare services, travel and tourism.

The officials from the CBO have stated that the Bank has decided to take the following measures from the issuing date.

Risk classification

They also referred to the banks and FLCs “to accept requests for deferment of loan instalments/ interest/profit for affected borrowers particularly small and medium enterprises (SMEs) with immediate effect for the coming six months without adversely impacting the risk classification of such loans.” In reference to the CBO circulars that were issued earlier, the Bank has also pointed out deferring the risk classification of loans pertaining to government projects for a period of six months. The measures taken include “reduction of existing fees related to various banking services and to abstain from introducing new ones during the year 2020, reduction of the interest rate on repo operations by 75 basis points to 0.50 per cent, and an increase in the tenor of repo operations up to a maximum period of three months.”

Also, the CBO statement has called for a reduction in the interest rate on discounting of Government Treasury Bills by 100 basis points to 1.00 per cent has also been directed.

Stimulate growth

Speaking to the Times of Oman, Dr Nasser Al Mawali, Dean of the College of Banking and Financial Studies, said, “The decisions issued today by the Central Bank of Oman (CBO) are highly motivational. These decisions will help in the current economic situation and contribute to achieving financial stability and will stimulate the growth of economy in the Sultanate.”

He also said, “These decisions will enhance the purchasing power and domestic demand and therefore will positively reflect on the financial stability in the Sultanate and the growth of the economy in general. The measures have been taken by CBO to provide liquidity in the range of OMR8 billion which will be pumped into the local market after implementing these procedures.” “The postponement of loans to small and medium enterprises and companies will give them space to adapt to the current economic conditions, and thus will push these companies and enterprises to be more effective and productive.”