Personal loan or consumer loan remains the mainstay or key revenue driver for Omani banks. The aggregate personal loan portfolio, including mortgage finance, grew by 6.8 per cent to touch RO4294.7 million at the end of 2010, over the same period of 2009. This constitutes 40 per cent of last year's total credit portfolio of all banks, which stood at RO10.724 billion, according to the annual report of Central Bank of Oman (CBO).
The report said that on an incremental basis, the flow of credit to consumers resulted in an additional disbursement of RO274.9 million last year.
"Within the personal loan segment, residential housing loan credit stood at 6.1 per cent, which is well within the 10 per cent ceiling stipulated by the CBO," the Central Bank of Oman report noted.
CBO stipulates an upper ceiling of 40 per cent of a bank's total credit portfolio as personal loan and another 10 per cent as mortgage finance. The interest ceiling on personal loan is set at 8 per cent, which is aimed at easing the interest burden of small borrowers.
CBO report said that the overall bank credit had registered an annual growth of 9 per cent in 2010, which is against a 6.2 per cent growth in the previous year. "The gradual softening of interest rates on lending by banks helped in keeping credit delivery on track," said the report, adding: "The CBO does not pursue any administered lending policy by setting targets for priority sector lending, other than wstipulating a prudential ceiling on the quantum of aggregate personal loans and non-resident lending."
Ceiling on lending
While personal loans have been the key driver for banks, the surge in such lending may accentuate indebtedness of households with implications for sustainability of private consumption and savings.
"CBO, therefore, continues to place a maximum ceiling on commercial bank lending for non-housing personal loans at 40 per cent and residential housing personal loans at 10 per cent of the individual bank's total credit portfolio keeping in mind that rapid increase in personal loans may impinge on bank credit for investment activities with implications for economic growth."
As far as the deployment of credit to other sectors is concerned, loans extended to the construction sector occupied the next major sector after personal loans, with a share of 10.1 per cent of total credit portfolio.
"This was followed by the services sector, manufacturing sector, import trade, wholesale and retail trade, and mining and quarrying sector." The construction sector accounted for an additional net credit outlay of RO182 million last year, following by services sector at RO156.1 million and transport and communication sector at RO103.3 million.