CBO ALLOWS NBFCS TO ISSUE CREDIT CARDS, ENGAGE IN ADDITIONAL ACTIVITIES

MUSCAT: With a view to strengthen Oman’s leasing and finance industry by providing additional avenues for more and diversified source of business, the Central Bank of Oman (CBO) has allowed non-banking finance companies (NBFCs) to engage in additional activities.

NBFCs, also know as finance and leasing companies (FLCs), may issue white labelled credit cards carrying their names to their customers to accommodate their requirements in collaboration with local banks, according to a circular issued by the CBO.

While issuing banks will take responsibility for administrative, settlement and other related jobs, FLCs’ role will be limited to branding and marketing of credit cards. ‘FLCs should exercise necessary diligence and restraint in promotion of credit cards noting that such facility is being offer as payment convenience and short-term accommodation. Credit card exposure to individuals of FLCs, if any, shall be within the ceiling limit applicable to them’, the CBO said.

It said FLCs shall note to seek CBO’s prior approval to engage in the credit card activity submitting all the relevant particulars including details of arrangements with banks and approved criteria for credit limits.

Additionally, to enable NBFCs to meet customers’ business requirement and to enhance their fee-based income sources, the CBO has allowed NBFCs to issue guarantees to their customers subject to capturing 50 per cent for risk weightage for leveraging limitations and reporting accordingly. While NBFCs are not permitted to lend against shares, under the permission of additional activities by the CBO they may accept shares of companies listed on Muscat Securities Market (MSM) as collateral for loans and credit facilities extended by them.

Aftab Patel, CEO of Al Omaniya Financial Services Co, the largest NBFC in the sultanate, said the Central Bank’s decision is a step in the right direction to allow finance companies to diversify their activities.

“Finance and leasing companies have many years of experience in Oman and now they would be able to offer more choices to customers. It will certainly help those finance companies who would carefully manage these new activities,” he said.

On CBO’s decision to allow NBFCs to issue guarantee to customers, Patel said the licenses to issue guarantee were already there with a few finance companies, but now it is offered to all the companies.

“We would like to urge the CBO that it should be communicated to all the ministries and relevant departments to inform them that NBFCs are allowed to offer guarantees so that our guarantees get accepted on government projects,” he said.

Patel added that finance and leasing firms will need to work hard on IT platforms and put additional efforts in order to be equipped to process and manage credit card operations.

“It would allow finance companies to offer more comprehensive solutions to customers. Previously, credit cards were provided only through banking companies. It is going to be a win-win situation for both customers and finance companies,” he said.

SOURCE: MUSCAT DAILY