The Central Bank of Oman (CBO) said that it will provide U.S. dollar funds to banks through reverse swap facility and direct lending of dollars in coordination of the country's Finance Ministry, the English Oman Daily Observer reported on Monday.
CBO's decision aimed at helping local banks overcome the dollar liquidity constraints brought on by the prevailing conditions in the international markets, the report said.
The reverse swap transaction envisages banks to enter into a foreign exchange swap transaction with CBO in which the banks will buy spot dollar in the first leg in exchange for Omani rials and sell back the dollar forward in exchange for Omani rials at specified exchange rates. The tenor of the swap will be for a period of one and up to three months, according to a statement by CBO.
The direct lending facility will be provided to the banks by CBO in dollars. The loan will be made available for a fixed period of one and up to three months.
The funds availed from CBO through the direct lending or the reverse swap mechanisms are to be used by the banks strictly for the purpose of providing funding for local project loans and for meeting all other loan commitments already entered into or to repay the outstanding foreign currency deposits or foreign currency borrowings from banks abroad, if they cannot be rolled over, the statement said.
In order to maximize utilization of these two mechanisms, CBO allowed banks to avail the dollar funds under any one or a combination of the two facilities subject to compliance with the overall limit earmarked for each bank.
CBO said in its statement that the facilities will be made available till the international markets return to normal conditions or as deemed appropriate by CBO.
Source: Xinhua
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