Central Bank of Oman

05/09/2021 | Press release | Distributed by Public on 05/10/2021 03:29

Review of Banking and Monetary Developments –...

Data issued by the Central Bank of Oman indicated that the total deposits held with ODCs registered a Y-o-Y growth of 2.5 percent to reach RO 24.7 billion at the end of March 2021. Total private sector deposits increased by 7.3 percent to RO 17.1 billion.

The nominal GDP, as per the preliminary data released by National Centre for Statistics and Information (NCSI), showed a decline of 15.3 percent during the fourth quarter of 2020 over the same period of 2019. The contraction was driven by decline in output of both the hydrocarbon sector by 23.4 percent and non-hydrocarbon sector by 10.5 percent. The Omani oil average price during March 2021 at $49.5 per barrel was lower by 23.1 percent than that in March 2020.The average daily oil production at 953.6 thousand barrels during March 2021 declined by 4.5 percent. The Sultanate's Consumer Price Index (CPI) showed a y-o-y deflation of 1.1 percent during March 2021.

The other depository corporations (ODCs) consist of conventional and Islamic banks in Oman. The total outstanding credit extended by ODCs grew by 3.0 percent to RO 27.2 billion at the end of March 2021, while credit to the private sector demonstrated a relatively moderate growth of 0.9 percent (Y-o-Y) to reach RO 23.3 billion. The shares of non-financial corporate sector and the household sector (mainly under personal loans) in the total private sector credit stood at 46.8 percent and 45 percent, respectively, at end- March 2021. The share of financial corporations was 4.9 percent and other sectors received the remaining 3.3 percent of the total private sector credit as at end- March 2021.

In terms of sector-wise composition of private sector deposits, the share of households deposits stood at 51.0 percent, followed by non-financial corporations at 32.7 percent, financial corporations at 13.9 percent and the other sectors at 2.4 percent.

The combined balance sheet of conventional banks showed a Y-o-Y growth of 1.5 percent in total outstanding credit as of end- March 2021. Credit to the private sector declined by 0.7 to reach RO 19.1 billion while their overall investments in securities went up by 24.9 percent to RO 4.6 billion at end- March 2021. Investment in Government Development Bonds increased by 5.3 percent compared to the same period last year to RO 1.8 billion while their investments in foreign securities declined by -13.9 percent to RO 0.96 billion at the end of March 2021. Aggregate deposits held with the conventional banks increased by 0.8 percent Y-o-Y to RO 20.7 billion at end- March 2021. Government deposits with conventional banks witnessed a decrease of 10.5 percent at RO 4.4 billion, likewise, deposits of public enterprises declined by 19.7 percent to RO 1.2 billion. Private sector deposits, which accounted for 70.4 percent of total deposits with conventional banks, increased by 6.7 percent as of March 2021 to reach RO 14.6 billion.

Islamic banking entities provided financing of RO 4.5 billion at the end of March 2021, recording a growth of 11.0 percent over that a year ago. Total deposits held with Islamic banks and windows increased by 12.7 percent to RO 3.9 billion. The total assets of Islamic Banks and Windows increased by 12.2 percent on a Y-o-Y basis to RO 5.4 billion and constituted about 14.7 percent of the banking system's assets as at end- March 2021.

Among the indicators of monetary aggregates, broad money supply M2 at end- March 2021 grew by 5.2 percent to reach RO 19.8 billion. This increase was the outcome of 0.9 percent expansion in narrow money (M1) and 7.1 percent increase in quasi-money (Rial Omani saving and time deposits, certificates of deposit issued by banks, margin deposits and foreign currency denominated deposits). Likewise, the increase in M1 resulted from the growth of both currency with public and demand deposits by 2.1 percent and 0.6 percent, respectively, during the same period under discussion.

The weighted average interest rate on RO deposits witnessed a marginal increase from 1.936 percent at end March 2020 to 2.009 percent at end- March 2021, similarly the weighted average RO lending rate increased from 5.479 percent to 5.511 percent over the same period. Meanwhile, the overnight Rial Omani domestic inter-bank lending rate fell significantly to 0.547 percent in March 2021 from 2.088 percent a year ago, reflecting transmission of policy rate cuts by the CBO in line with the rate cuts by the Federal Reserve. The average Repo rate for liquidity injection by the CBO at end- March 2021 stood lower at 0.5 percent compared with 1.039 percent a year ago.