SAMA’s SAR 50 bln liquidity boost is zero-interest, 1-year deposits: governor

The SAR 50 billion worth of liquidity boost injected today by the Saudi Arabian Monetary Authority (SAMA) in all Saudi banks represents zero-interest, one-year deposits, Governor Ahmed Alkholifey told Al-Arabiya TV, noting that this move is the first of its kind since the outbreak of the COVID-19 pandemic.

It aims to enhance liquidity and reduce the burden for banks, which covered the deferred payments of large companies that are not included in the private sector support program. It also helps the banks exposed to other enterprises in Makkah and Madinah.

The Saudi central bank is closely monitoring liquidity indicators and asset kind in the banking sector on a weekly basis to ensure adequate provisions.

In case more liquidity or facilities are needed, the authority will not hesitate to take the necessary action.

The monetary supply exceeded SAR 2 trillion in March, and continued to grow by 10% year-on-year in April, Alkholifey said, adding that 89% of which are bank deposits – which strengthened the sector’s financial position.

The private sector credit growth crossed 12%, of which 60% was concentrated in the real estate and consumption industries.

“The loan-to-deposit ratio increased. The ratio which was set by SAMA at 90% was exceeded by three banks,” the central bank governor explained.

The liquidity pumped today is different from the SAR 50 billion stimulus package announced recently to support the private sector. Moreover, the deferred payments of small and medium-enterprises (SMEs), for which a total of SAR 30 billion were allocated, have reached SAR 42 billion.

In addition, as many as 65,000 contracts were concluded between banks and small enterprises to benefit from the support scheme.

Alkholifey noted that a new program for open market operations will be put into effect later this month. Accordingly, banks will be able to use open market operations when necessary.

Meanwhile, no significant change was observed in the Kingdom’s reserves for May, Alkholifey explained, stressing that there is no change in the riyal-dollar peg policy.

SAMA pumped today SAR 50 billion into the banking sector to boost liquidity and enhance lending capacity for the private sector, Argaam reported.