Muscat – Total outstanding credit extended by Oman’s banking sector grew by 3.2% year-on-year to reach RO31.1bn at the end of May 2024, the latest statistics released by the Central Bank of Oman (CBO) showed.

Of the total bank lending, credit to the sultanate’s private sector grew by 3.1% year-on-year to reach RO26.1bn as of May 2024, the CBO said in its monthly statistical bulletin.

The shares of the non-financial corporate sector and household sector (mainly under personal loans) in total private sector credit stood at 45.4% and 45.3%, respectively. The share of financial corporations was 5.7%, and other sectors received the remaining 3.6% of total private sector credit.

The growth in total banking sector credit was mainly contributed by Islamic banking entities while conventional banks reported slow growth in lending. The combined balance sheet of conventional banks showed a year-on-year growth of just 1.3% in total outstanding credit as of end-May 2024.

The conventional banks’ credit to the private sector increased by 1.1% to RO20.3bn, while their overall investments in securities went up by 20.8% to RO5.6bn. The conventional banks’ investment in government development bonds decreased by 9% to RO1.9bn, while their investments in foreign securities dramatically increased by 80.6% to RO2.2bn at the end of May 2024.

By contrast, Islamic banking entities provided total financing of RO6.4bn at the end of May 2024, recording a robust growth of 16.7% over that a year ago. The total assets of Islamic banks and windows grew by 17.4% on a year-on-year basis to RO7.6bn and constituted about 18.1% of the banking system’s assets at the end of May 2024.

Robust growth in deposits

The data issued by the central bank indicated that total deposits held with the banking sector registered a robust year-on-year growth of 9.2% to RO30.0bn at the end of May 2024. Total private sector deposits grew even higher at a 14% rate to RO20.4bn.

In terms of the sector-wise composition of private sector deposits, the share of household deposits stood at 50.4%, followed by non-financial corporations at 29.4%, financial corporations at 17.4%, and other sectors at 2.8%.

Aggregate deposits held with Oman’s conventional banks increased by 7.1% year-on-year to RO23.9bn at end-May 2024. The government deposits with conventional banks witnessed a decrease of 3.8% to RO5.2bn. Deposits from public enterprises decreased 1.5% to RO1.7bn.

Private sector deposits, which accounted for 67.8% of total deposits with conventional banks, increased by 9.9% as of May 2024 to reach RO16.2bn.

Total deposits held with Islamic banks and windows surged by 23.5% to RO6bn as of May 2024.

Interest rates rise

According to the CBO’s data, the weighted average interest rate on Omani rial deposits with conventional banks witnessed an increase from 2.242% at end-May 2023 to 2.627% at end-May 2024.

On the other hand, the weighted average lending rate increased from 5.443% a year ago to 5.621% in May 2024.

Meanwhile, the overnight Omani rial domestic inter-bank lending rate aso rose to 5.501% in May 2024 from 5.295% a year ago, the data showed.

‘This rise in interest rates is an outcome of the increase in the average repo rate for liquidity injection by the CBO to 6.0% from 5.726% a year ago, moving with US Federal Reserve,’ the Central Bank of Oman said in its monthly bulletin.

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