With lower oil prices continuing to drive reduced deposit inflows at Omani banks, the widening gap between credit and deposit growth is a credit negative for Oman's banking system, Moody's Investor Service has warned. The Central Bank of Oman's Monthly Statistical Bulletin for May 2016 showed a 13.5% growth in total credit extended by the sultanate's conventional and Islamic banks over the 12 months ended in May, materially exceeding the low 0.4% growth in total deposits. Moody's said that the gap between credit and deposit growth is widening and has increased the system average net loan-to-deposit ratio to 108.4% as of May 2016, compared with 95.8% as of May 2015. This financing gap negatively affects banks' funding and liquidity profiles. “To fill the gap, Omani banks are increasing their reliance on market funding, which tends to be more expensive and more confidence sensitive than deposits. The banks are also using their liquid resources to make loans, which reduces their liquidity buffers,” Moody's said in its sector comment released on Thursday. (Muscat Daily)