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HomeWorldReview of Oman Banking and Monetary Developments March 2010

Review of Oman Banking and Monetary Developments March 2010

Oman’s gross domestic product (GDP) at current prices declined by 23.5 percent in 2009 in contrast to an increase of 43.9 percent in 2008. While the hydrocarbon sector witnessed a sharp decline of 38 percent on account of lower oil prices, non-petroleum activities shrank by 7.3 percent in 2009.

During the first quarter of 2010, there were early signs of pick up in the deposit growth while the credit growth continued to remain sluggish. Total assets increased by 8.5 percent in March 2010 to RO. 14,869.4 million compared to RO. 13,698.4 million in March 2009. Cash on hand and deposits of commercial banks with the CBO amounted to RO. 1,211.6 million at the end of March 2010 compared to RO. 1,018.3 million in March 2009 suggesting comfortable liquidity condition.

Total outstanding credit increased by 5.7 percent to RO. 9,998.6 million at the end of March 2010 from RO. 9,455.5 million a year ago. Outstanding investments in securities (domestic and foreign) increased to RO. 1,783.8 million in 2010 from RO. 1,377.1 million in March 2009.

Investments of commercial banks in CBO CDs increased from RO. 914 million in March 2009 to RO. 1,339 million in March 2010, whereas outstanding investments in foreign securities declined to RO. 172.2 million from RO. 214.3 million during the same period. On the liabilities side of the balance sheet, aggregate deposits (Rial Omani plus foreign currency) witnessed a year-on-year growth of 13.2 percent to RO. 9,788.8 million in March 2010 from RO. 8,650 million in March 2009.

Government deposits with commercial banks increased by 25.5 percent to RO. 2,148.8 million, while deposits of public enterprises rose by 39.9 percent to RO. 870.2 million for the same period. Private sector deposits (accounting for 69.2 percent of total deposits with commercial banks) registered an increase of 7.2 percent to RO. 6,769.8 million by the end of March 2010 from RO. 6,315.4 million a year ago.
For the first quarter of the year, provisional figures for net profits stood at RO. 64.4 million in 2010 compared to RO. 79.9 million in the previous year. Provisions and reserve interest at the end of March 2010 amounted to RO. 298 million compared to RO. 235.3 million in 2009.
 Broad money (M2) increased by 9.1 percent to RO. 8,275.4 million in March 2010 compared to RO. 7,587.2 million in March 2009.

In respect of domestic interest rate structure of commercial banks, the weighted average interest rate on Rial Omani deposits (demand, savings & time deposits of all sectors) decreased from 2.513 percent in March 2009 to 2.096 percent in March 2010, while the weighted average Rial Omani lending rate increased from 7.234 percent to 7.350 percent during the same period suggesting risk-averse behavior of banks. The interest rate spread between Rial Omani lending and Rial Omani deposit rates increased from 4.721 percent at the end of March 2009 to 5.254 percent at the end of March 2010.

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