Oman warns lenders on unhealthy competition in personal loans

Chairing an annual bankers meeting at the CBO premises on Monday, Al Zadjali warned against unhealthy competition that focused on increasing the number of salary multiples eligible for personal loan or elongating the maturity of such loans to a very long period.

"We do believe that banks on their own would keep the long-term interest of the customer, the bank and the financial system while deciding on such issues and be reasonable," he stressed in his speech.

He added that the Central Bank would be closely watching the developments and would intervene if warranted and possible measures could include, among other things, increasing the regulatory capital, or reserve and general provision requirements for such loans, fixing the number of multiples or prescribing a quantum cap on such loans.

He discussed with bank officials the issue of bank guarantors who have volunteered to help borrowers obtain personal loans, noting that the guarantors should be the last person that banks turn to in cases where individuals have defaulted on their personal loans.

He took the opportunity to remind banks: "We appear to be in the midst of an economic boom, banks should be extremely careful in their lending decisions, as history tells us that banks tend to be very liberal in sanctioning credit during boom time which haunts them as the economic cycle turns over".

Banks reap richharvest in 2006

The Central Bank of Oman (CBO) Executive President, Hamoud Bin Sangour Al Zadjali, pointed out that 2006 was one of the most profitable years for banks operating in the country.

In the year under review, the lenders posted significant growth in assets, deposits and loans, supported by robust macroeconomic environment, he said.

Looking ahead, Zadjali noted that the banking system is expected to do well as the economy grows from strength to strength.

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