OMAN - FINANCE & LEASING COMPANIES APPROVED FOR ADDITIONAL BUSINESS ACTIVITIES

22 August 2023

Gandhi Alminaj

There are few major regulatory changes that happened in 2023 which aimed to support professionals in their business and daily personal.

Oman: On 4 June 2023, the Central Bank of Oman has issued Circular FM 41 allowing all Finance and Leasing Companies (FLCs) to conduct additional business activities and has also amended some existing conditions as applicable to authorized activities as follows:

The main changes and or additions to the authorized activities:

1.      Exchange Reserve on Foreign Currency Borrowings:

FLCs will be exempted to create an exchange reserve of 20%, in the event the foreign currency borrowings - in excess of 40% of net worth - is in United States Dollars (USD) or in any other currency, where the exchange rate risk is hedged.

2.     Investments:

FLCs are allowed to invest in rated corporate bonds listed in Muscat Stock Exchange, at the condition of a maximum of 10% of its net worth. However, FLCs will not be able to invest in any corporate bonds issued by any related parties or by borrower companies.

3.     Working hours:

The new CBO allows the FLCs to perform a change in their business hours at their own discretion, without conflict of any instructions under the labor law.

The FLC Branches may operate on all calendar days of the year, without applying to receive the CBO’s approval. Some other conditions also applies as mentioned in the Circular.

4.     Accepting Deposits:

FLCs will be able to accept deposits from corporates only; with a minimum deposit of OMR 5,000; in Omani Riyal; and for a minimum period of three (3) months and maximum period of sixty months and will not be repayable on demand, to include the renewal of deposits, subject to the fact that the total deposits with the FLC will not exceed its net worth and that the liabilities of the depositors, to include the deposits will not exceed five times of the net worth of the corporate; and that the corporate deposits are not being eligible for coverage under the Bank Deposit Insurance Scheme and the same will be notified to the depositors.

5.     Lending Scope:

The FLC lending activity has broadened under the new Circular as follows:

a)     Provision of finance to commercial projects and provide loans to the developers for development of real estate projects (inclusive of residential units) at the condition that the total real estate lending will not exceed 50% of the FLC net worth, and without having a centric exposure to a single customer not to exceed 10% of the FLC net worth and their aggregate exposure to the Connected Counterparty and Related Part will not exceed 25% of the FLC net worth;

b)     Provide unsecured Personal Finance to individuals subject to the following:

a. the monthly net salary is less than OMR 1,000 with a maximum Debt Burden Ration of 50% (to these customers who do not have home loans) and 60% (for the clients already having existing home loans);

b. maximum tenor of 7 years;

c. the purpose of loan should not be linked to a business activity;

d. top-up of personal loan will be authorized only after 12 months of satisfactory conduct or after that 50% of the existing loan is settled or if the loan was not fully sanctioned as per its eligibility; and

e. the total of FLC personal loan portfolio including both secured and unsecured, will not exceed 50% of the total FLC lending by FLC

Both Secured and unsecured Working Capital Facilities will be considered against the FLC own customer deposits, to be subjected solely to the maximum of the deposit amount.

ALKETBI TOUCH:

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