Oman's Central Bank has adjusted its reserves policy to ease money market conditions and encourage banks to buy government debt, as low oil prices strain state finances and liquidity in the banking system. Banks can now count Treasury bills, government development bonds and government sukuk towards their reserve requirements, up to a maximum of 2% of their deposits, the Central Bank said in a statement posted on its website on Tuesday. The move, effective from this month, aims to "provide greater flexibility for banks in liquidity management, credit deployment and investments", the statement said. Banks must park 5% of their deposits at the Central Bank, a ratio which the Central Bank left unchanged. In principle, these reserves should be in the form of cash, letting banks count their holdings of government debt towards part of the reserves will free up cash which the banks can lend back to the economy. Conventional and Islamic banks in Oman had a total of OMR19.4 billion (USD50.4 billion) of deposits at end of January, suggesting the policy change could release the equivalent of about USD1 billion of fresh liquidity. (Reuters)