MUSCAT : “Digital banking is the future and Sultanate of Oman is at the forefront of this transformation,” stated the CBO’s announcement, which also outlined the concept of digital banks and the key features differentiating them from others.

Defined as banks offering all banking products and services exclusively through digital channels, these institutions are equipped to provide a wide range of value-added banking products and services across the financial ecosystem.

The CBO also clarified that these banks will leverage cutting-edge financial technology to reduce costs, simplify processes, and provide innovative, round-the-clock solutions accessible without the need for traditional branch visits or extensive paperwork.

The new framework, introduced pursuant to Article 9 of the Banking Law and Articles 8 and 17 of the CBO Statute, outlines specific regulatory requirements and limitations for licensing digital banks in Oman. It categorises licenses into two types based on minimum paid-up capital:

• Category 1 Digital Bank License (without limitations): Requires a minimum paid-up capital of RO 30 million for a locally incorporated joint-stock company.

• Category 2 Digital Bank License (with limitations): Requires a minimum paid-up capital of RO 10 million for a locally incorporated joint-stock company.

For branches of foreign banks, the capital requirement will be determined by the Governor of the Central Bank of Oman.

The framework also details shareholding restrictions for locally incorporated digital banks, similar to existing banking regulations, limiting aggregate holdings by individuals, incorporated bodies, and joint-stock companies.

Prospective applicants must demonstrate extensive experience and knowledge in the financial industry, appropriate technology-related expertise, and sufficient financial capacity to establish and support a digital bank. Their ultimate beneficiary owners, board members, and senior management must comply with the CBO’s “fit and proper” criteria. Foreign digital bank branches will additionally require approval from their head office’s supervisory authority and a commitment to joint supervision with the CBO.

A crucial aspect of the application process is a comprehensive business plan, which must include a financial inclusion strategy, a detailed work plan, market studies, and projections for digital channels and services. Emphasis is placed on Information Technology (IT) infrastructure plans, covering architecture, scalability, data protection, cybersecurity measures, and business continuity. Applicants must also provide financial projections, risk management strategies, talent acquisition plans, customer complaint handling measures, and a strategy for adopting new technologies like big data, AI, and open banking.

Under the new regulatory framework, digital banks are required to establish a physical presence within the Sultanate, either as a head office for locally incorporated entities or a registered office for branches of foreign digital banks. This location must enable effective communication and supervision by the CBO, including access to senior management and the board of directors.

While digital banks are not permitted to open traditional customer-facing branches, they may set up additional physical offices for administrative purposes or to facilitate face-to-face customer inquiries, complaints, or support—provided these offices meet regulatory standards. Furthermore, any intention to appoint banking agents must receive prior written approval from the CBO.

Exit Plan:
A significant requirement for all applicants is an Exit Plan for the first five years of operation. This plan must detail potential management triggers for exiting the business (e.g., capital, liquidity, earnings, or asset quality issues), steps to manage customer funds, options for orderly unwinding or transfer of business, mitigation of impediments, and sources of funding for exit. This ensures an orderly cessation of operations if the business model proves unsustainable, minimizing disruption to customers and the financial system.

The CBO reserves the right to request additional information, reject incomplete applications, or revoke licenses if false information is submitted. Applications will be processed within 90 days from the date of completion notification, and successful applicants must complete establishment procedures within one year of receiving in-principle approval.

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