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In January, Oman took a significant step toward modernising its financial landscape with the enactment of the new Banking Law under Royal Decree No. 2/2025.
This reform, coupled with the Central Bank of Oman’s (CBO) issuance of a dedicated regulatory framework for digital banks in June, marks a pivotal moment in Oman’s journey toward financial innovation, in line with Oman’s Vision 2040 strategy of diversifying the economy and positioning the country as a regional fintech hub.
Regulatory shifts: Progress and pitfalls
These recent regulatory developments have introduced comprehensive guidelines for digital banking operations, encompassing licensing requirements, operational standards, and consumer protection measures. These changes are designed to create a more inclusive financial ecosystem while maintaining the robust oversight necessary for systemic stability.
Applicants for digital banking licenses must either be structured as a joint-stock company (SAOC or SAOG) (a move intended to improve corporate governance and transparency) or as a branch of a foreign bank which is subject to supervision of a regulatory authority of the country in which its head office is located.
The CBO is also required to respond to license applications within 90 days, a reduction from the previous 120-day window, with silence deemed as approval.
While these changes are largely welcomed, some drawbacks remain. The joint-stock company requirement may pose a barrier for smaller fintech startups seeking entry into the market. The regulatory framework for digital banks features two license categories: Category 1 (full operations) requires a minimum paid-up capital of OMR30m for unrestricted banking activities, while Category 2 (limited operations) requires OMR10m and imposes restrictions such as caps on customer deposits and corporate lending, and a prohibition on proprietary trading. These dual licensing categories for digital banks could restrict innovation in the lower tier due to the caps on customer deposits and lending.
Navigating these regulatory transitions – How can we help?
In advising banking and finance clients through this regulatory evolution, our approach centres on three pillars: compliance readiness, strategic positioning, and risk management.
Businesses have to identify where current operations diverge from new regulatory requirements – a process that involves reviewing everything from capital adequacy and liquidity management to technology governance and consumer protection protocols. Early identification of compliance gaps allows institutions to develop phased implementation roadmaps that balance regulatory obligations with business continuity.
Strategic positioning is equally critical. We advise clients on whether to pursue digital banking licences, form partnerships with fintech companies, or enhance existing digital capabilities organically. Each path carries distinct regulatory implications, capital requirements, and competitive advantages that must be carefully evaluated against the institution’s broader business strategy.
Risk management frameworks require particular attention in this new environment. Key points of consideration include issues of cybersecurity, AML/CFT controls suited to digital channels, and proper governance structures that provide adequate oversight of rapidly evolving digital operations.
Establishing a physical presence: A new path for foreign digital banks
Foreign digital banks now have a clearer pathway to enter the Omani market. Under the new framework, they may operate as branches subject to regulatory oversight in their home jurisdictions, provided they obtain confirmation of no-objection from their supervisory authority and meet CBO’s fit-and-proper criteria for management and ownership.
A physical presence in Oman is mandatory, either as a principal place of business or a registered office. While traditional branches are not permitted for transactional purposes, administrative offices for customer support are allowed. This model supports a digital-first approach while ensuring local accountability.
Foreign banks must also submit detailed business plans, meet capital requirements as determined by the CBO governor, and adhere to strict consumer protection, AML, and cybersecurity standards. Shell banks are explicitly prohibited, reinforcing the CBO’s commitment to financial integrity.
Aligning with Oman Vision 2040: A strategic leap forward
These reforms are deeply intertwined with Oman Vision 2040, Oman’s blueprint for economic diversification and sustainable development. Vision 2040 emphasises a shift from oil dependency to a knowledge-based economy driven by innovation, private sector growth, and global integration.
The modernisation of the financial sector is central to this transformation. By enabling digital banks, Oman is fostering financial inclusion, improving access to capital for SMEs, and encouraging the adoption of emerging technologies such as AI, and digital banking.
A new era for banking in Oman
Oman’s recent digital banking reforms represent more than regulatory updates; they signal a strategic pivot toward a future-ready financial sector. The journey toward full digital banking maturity will take time, requiring continued collaboration between regulators, financial institutions, and technology providers.
However, the regulatory foundation has been laid, creating a framework that balances innovation with stability — precisely the environment required for sustainable financial sector modernisation.
