Oman’s central bank said that the country is still committed to peg rial to the United States dollar and the value of the currency in the futures market did not change.
Oman’s central bank said that the country is still committed to peg rial to the United States dollar and the value of the currency in the futures market did not change.
Responding to rumours in the market, Hamoud bin Sangour Al Zadjali, executive president of the Central Bank of Oman, stated that other Gulf states also refuted baseless rumours of devaluation of Omani rial against other Gulf currencies.
Such reports are generated in light of the economic pressures that oil-producing countries currencies are falling due to decline in global oil prices since the middle of last year, he added.
“False and unverified stories have been spreading around lately about the fluctuating value of the Omani currency, especially on social media, prompting the Central Bank of Oman to publish clarifications to the public,” the central bank chief said in the latest edition of the ‘Al Markazi’ magazine.
He also clarified that interest rates in the Oman’s banking sector are determined by supply and demand forces in line with the principles on which the Omani economy is based, including market freedom.
The Central Bank of Oman has realised early on that the banking sector must be guided to increase lending towards productive sectors instead of focusing on personal loans that have negative impacts on the economy in general, he added.
The CBO has taken numerous measures including consecutive reduction of interest rate on personal loans and the latest action was in October 2013 where a circular was issued to all commercial banks in the Sultanate to reduce interest rate ceiling on personal loans from 7 per cent to 6 per cent per annum.
“Such measures and reductions are carried out upon periodical review by the board of governors towards the various issues that concern the banking sector including setting interest rates in general,” noted Al Zadjalil.
There was a decline in interest rates in the local banking sector in the recent past, as the likely average of interest rates on loans in Omani rial declined from 5.080 per cent in December 2014 to 4.762 per cent in December 2015. The decline in the interest rates was mainly attributed to the low risk level associated with personal loans.
“There are no plans to raise the ceiling imposed on interest rate on personal loans under the current conditions,” added the central bank chief.
In case of a hike in interest rates on deposits, which may lead to an increase in financing costs on borrowers and in price levels, he said. “This will attract more customers to deposit their savings in commercial banks to benefit from the return on increased fixed deposit rates.”
In order to keep risk at a certain manageable level in a manner that enhances safety indicators and solidity of financial institutions and consolidating the stability of the financial system while facilitating financial transactions in a way that benefits the economy and the country in general, precautionary directives and regulations on credit disclosure are currently applied to non-residents and funds deposited abroad. These were set forth and reviewed by the Central Bank of Oman and completed through consultation with commercial banks that made valuable contributions in this respect.
Accordingly, CBO expects the Omani banking sector to continue its fructuous performance in the current year 2016 under the tight surveillance of the Central Bank of Oman besides enjoying comfortable levels of liquidity and financial solvency. This will qualify it to meet the needs of the private sector, which is anticipated to maintain the growth momentum that enables it to play its leading role in the economic diversification process in the Sultanate. Meanwhile, Islamic banking operations which started three years ago are adding extra diversification and flexibility to the Omani banking sector and contributing in the enhancement of all banking indicators quantitatively and qualitatively.
Source: TimesOfOman