Oman has taken a decisive step towards modernising its financial sector with the enactment of a new Banking Law this January, a move reinforced by a dedicated regulatory framework for digital banks issued by the Central Bank of Oman (CBO) in June. These reforms mark a pivotal moment in the Sultanate’s journey toward financial innovation, aligning directly with the ambitious goals of Oman Vision 2040 to diversify the economy and establish the nation as a regional fintech hub.
A New Regulatory Landscape
The recent developments introduce comprehensive guidelines for digital banking, covering licensing, operational standards, and consumer protection. A key change is the CBO’s commitment to faster decision-making, reducing the response time for license applications from 120 to 90 days, with silence now deemed as approval.
Applicants seeking a digital banking license must be structured as a joint-stock company (SAOC or SAOG) or operate as a branch of a foreign bank already under regulatory supervision in its home country. This structure is intended to enhance corporate governance and transparency across the nascent sector.
Balancing Progress with Practical Hurdles
While the reforms are largely seen as a positive step, the framework introduces a dual-licensing system that may present challenges. A Category 1 license for full-scale operations requires a minimum paid-up capital of OMR 30 million. In contrast, a Category 2 license for limited operations requires OMR 10 million but comes with restrictions on customer deposits, corporate lending, and a prohibition on proprietary trading.
These capital requirements and the joint-stock company mandate could pose a significant barrier to entry for smaller, agile fintech startups. Furthermore, the operational caps on Category 2 licenses might limit the scope for innovation among new players aiming to test the market with more focused services.
A Clearer Path for Foreign Entrants
The new regulations provide a clear pathway for foreign digital banks to enter the Omani market. These entities can now operate as branches, provided they receive a no-objection confirmation from their home supervisory authority and meet the CBO’s stringent criteria for management and ownership.
A physical presence in Oman is mandatory, either as a principal place of business or a registered office. While transactional branches are not permitted, administrative offices for customer support are allowed, supporting a digital-first model while ensuring local accountability and service. All foreign entrants must also submit detailed business plans and adhere to Oman’s strict cybersecurity, AML, and consumer protection standards.
Powering Oman Vision 2040
These financial reforms are a cornerstone of Oman Vision 2040, the national blueprint for shifting from oil dependency to a diversified, knowledge-based economy. By enabling a robust digital banking ecosystem, Oman aims to foster greater financial inclusion, improve access to capital for SMEs, and accelerate the adoption of emerging technologies like AI within its financial services sector.
The foundation laid by the CBO creates a framework that balances innovation with stability, setting the stage for a new era of banking in the Sultanate and signaling a strategic pivot toward a future-ready financial landscape.
About the Central Bank of Oman
The Central Bank of Oman (CBO) is the primary regulatory body for the banking and financial sector in the Sultanate of Oman. Established in 1974, the CBO is responsible for maintaining the stability of the national currency, managing the country’s monetary policy, and supervising licensed banks and financial institutions to ensure a stable and efficient financial system.
Source: Gulf Business
