News Column

Omani banking and monetary developments, June 2014

August 31, 2014

Monetary management during 2014 in Oman so far continued to be confronted with abundance of bank liquidity, reports the Central Bank of Oman (CBO). As at the end of June 2014, narrow money stock (M1) when measured on year-on-year basis, grew sharply by 30.9 percent driven mainly by the increase in currency with the public by 16.8 percent, as well as increase in demand deposits by 36.2 percent.

Quasi-money (RO savings and time deposits, certificates of deposits issued by commercial banks, margin deposits and foreign currency denominated deposits) witnessed a growth of 8.5 percent during the period. The share of quasi-money to the total money stock declined to 63.9 percent in June 2014 as compared to 68.1 percent a year ago.

Broad money supply M2 (i.e. M1 plus quasi-money) stood at RO 13,046.6 million at end of June 2014, up from RO 11,281.0 million a year ago, registering an increase of 15.7 percent during the period.

In respect of domestic interest rate structure of commercial banks, both deposit and lending rates softened during this period. CBO's policy interest rate for absorption of surplus liquidity in the form of CBO CDs of 28 days maturity marginally declined to 0.123 percent in June 2014 from 0.130 percent in June 2013.

The CBO's policy rate for injection of liquidity, i.e. repo rate remained unchanged at 1 percent since March 2012.

The CBO report pointed out that ceiling interest rate on personal and housing loans was reduced by one percentage point to 6 percent with effect from October 2nd, 2013. The overnight RO domestic inter-bank lending rate declined from 0.156 percent in June 2013 to 0.128 percent in June 2014.

The weighted average interest rate on RO deposits declined from 1.247 percent in June 2013 to 1.041 percent in June 2014 while the weighted average RO lending rate decreased from 5.514 percent to 5.207 percent during the same period.

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Source: CPI Financial

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