Oman Cuts Interest Cap On Personal Loans To 6%

Oman’s central bank on Wednesday cut the ceiling on interest rates that commercial banks can charge on new personal loans to six per cent from seven per cent, to ease the financial burden on borrowers in the sultanate, state news agency ONA reported.

“This decrease comes as part of a regular review that the bank does on personal loan rates through the continuous analysis and statistics of the sector indicators,” ONA quoted the central bank board as saying.

“The board intends to make sure that the cost of debt in the local market is at levels that encourage savings and maintain stability in prices.”

Commercial banks in Oman charged local currency borrowers 5.464 per cent on average in July, the lowest rate since at least 2002, the latest central bank data show.

Annual growth in bank lending in Oman accelerated to a four-month high of 8.1 per cent in July. However, that is well below average credit growth of 17.3 per cent in 2012.

Oman, which experienced limited social unrest in 2011, faces challenges in tackling unemployment among its citizens and diversifying its hydrocarbon-reliant economy in coming years, when dwindling oil income and increased budget spending could push its public finances into the red.

In May, the central bank set a minimum target for bank lending to small and medium-sized firms, which are one of the pillars of the government’s diversification strategy.

Analysts polled by Reuters in September forecast Oman’s economic growth would ease to 3.9 per cent next year from an estimated 4.5 per cent in 2013.