The Regulatory Framework for Digital Banks in Oman

At the start of 2025, Oman made sweeping changes to modernise its banking law, which included the promulgation of a new Banking Law. One of the key changes introduced was the concept of “digital banks”, defined under the new Banking Law as a “Licensed Bank to conduct Banking through digital platforms or channels using modern technological techniques”. Article 9 of the new Banking Law provides that the Central Bank of Oman (CBO) will regulate digital banks in accordance with rules and provisions specified. The CBO has, on 1 June 2025, issued the regulatory framework (CBO Decision 25 of 2025) for digital banks (“Regulatory Framework”), which will be the key framework by which digital banks can operate in Oman. Digital banks will also be regulated by, amongst other laws, the new Banking Law in respect of any penalties or enforcement actions.

Key Provisions of the Digital Bank Regulatory Framework

Licensing:

There are two types of digital banking licenses under the Regulatory Framework. The first is a Category 1 Digital Banking License which allows a digital bank to carry out banking business without limitations. This license requires a minimum paid up share capital of OMR 30 Million if it is a locally incorporated joint stock company, or if it is a branch of a foreign bank, such capital requirements as determined by the governor of the CBO. The second is a Category 2 Digital Banking License, which can carry out banking business with restrictions such as: (i) the maximum deposit from a single customer and their related parties not exceeding 1% of the deposit portfolio, (ii) credit facilities to large corporates not exceeding 40% of the banks overall lending portfolio, and (iii) not being allowed to carry out any proprietary trading activities). It is important to note that restrictions (i) and (ii) do not apply for the first 2 years from the commencement of the digital bank’s business. This license requires a minimum paid up share capital of OMR 10 Million if it is a locally incorporated joint stock company, or if it is a branch of a foreign bank, such capital requirements as determined by the governor of the CBO. Digital banks will also be required to meet Omanisation requirements, starting from 50% in the first year and increasing by increments of 10% up to the fifth year, when it is required to be 90%.

Shareholding Restrictions:

• The aggregate holding by an individual and their related parties cannot exceed 15% of the voting shares.
• The aggregate holding by an incorporated body and its related parties shall not exceed 25% of the voting shares.
• The aggregate holding by a joint stock company or a holding company and its related parties shall not exceed 35% of the voting shares.
• No individual, incorporated body, joint stock company, or holding company and their related parties that owns 10% or more of the voting shares in a locally incorporated bank shall own more than 15% of the voting shares in another locally incorporated bank.

Licensing Prerequisites:

• An applicant that wishes to apply for a digital banking license must comply with the following:
• The applicant needs to have experience and knowledge in the financial industry and in relation to technology, and must have the financial capacity to support setting up the bank.
• The applicant must have a team with expertise to discuss the application.
• The applicant, its ultimate beneficial owners, and members of the board and senior management must comply with the fit and proper criteria set by the CBO.
• If the digital bank is a branch of a foreign bank, it must have approval from the supervisory authority of the head office of the foreign bank to operate in Oman and the correspondent supervisory authority must express its no-objection to apply the principle of joint supervision with the CBO. Shell banks are prohibited.
• The applicant must present a clearly articulated business plan. The Regulatory Framework sets out the minimum requirements for the business plan, which include requirements such as a financial inclusion plan aimed at bridging the gap for the unbanked and underbanked population, the nature of activities and services it will perform, details of the bank’s IT structure, financial projections, the internal capital adequacy assessment plan, a projected path to profitability, talent requirements, and measures to address queries and complaints.
• The applicant should also submit: (i) the draft articles of association; (ii) a statement setting out the ownership structure which identifies ultimate beneficial owners and ensures legitimacy of funds; (iii) evidence that none of the applicant, its significant shareholders (own 10% or more), or its ultimate beneficial owners are on any sanctions lists; (iv) other commercial activities pursued by significant shareholders; if the significant shareholders are part of a group (with shareholding of 10% or more), copies of the audited financial statements of such companies for the preceding 5 years along with an auditors report; and (v) if the application is for a branch of a foreign company, a copy of the parent bank’s financial statements for the preceding 5 years along with an auditors report.
• The CBO will assess the applicant and its shareholders collectively on the ability to contribute to the proposed digital bank as follows: (i) ability to meet minimum capital requirement; ability to provide clear value proposition, incorporate technology, and reach different segments of the Omani market; (iii) having robust risk and compliance capabilities demonstrated by a track record of operating in a regulated environment; (iv) applying transformative technology in the development and delivery of financial services; (v) access to deep and robust customer analytics; (vi) ability to serve as a source of financial strength for the bank; and (vii) if an Islamic digital bank, the requisite Shariah expertise.
  Digital banks (both local and foreign branches) must establish a physical presence in Oman which acts as a head office or a registered office for foreign branches. This does not act as a place of business to facilitate customer transactions.

Application Processing:

The CBO decides within 90 days from the date of notifying the applicant that the application is complete whether the application is granted or rejected. No response from the CBO within that period shall be deemed approval. The necessary procedures for establishment of the digital bank shall be completed within one year from the date of grant of in-principle approval from the CBO, unless an extension is granted.

Exit Plan:

Applicants are also required to prepare and submit an exit plan (covering the first 5 years at least) to ensure that the licensed digital bank is able to voluntarily unwind its business operations without any regulatory intervention and in an orderly manner without causing any disruption to its customers and the financial system. The Regulatory Framework sets out what must be included in the exit plan, which includes: (i) management triggers for exiting the business; (ii) steps to manage customer funds, ongoing business, and continuing service; (iii) options relating to business which minimizes disruption to customers and the financial system; (iv) impediments to exit options and preparatory measures to mitigate such impediments; (v) sources of funding and liquidity for the exit (excluding assistance from the CBO) and estimated timeframe for exit.

Who Does This Affect?

In today’s increasingly digital age, this is a new option for both local and foreign entities who wish to tap into the Omani market. This development would be particularly encouraging for the numerous digital banks set up across the GCC.

How can we help?

Al Tamimi’s Banking and Finance Team in Oman has significant experience dealing with and advising both local and foreign entities on the regulatory obligations of banks in Oman. We would be delighted to assist.