Deposits in Jordan's banking sector rose by 11 per cent in December against the same period in 2008 to 20.1 billion dinars ($28.3 billion) with strong inflows into the local currency assets, central bank data showed on Friday.

Private sector deposits, mostly dinar-denominated assets that exclude public funds, rose 10.4 per cent to 15.78 billion dinars at the end of December 2009 against 14.29 billion dinars at the end of 2008, according to Central Bank of Jordan (CBJ) data obtained by Reuters.

Bankers say the CBJ policy to allow a wider interest rate differential against the dollar in favour of the dinar had encouraged banks and depositors to hold funds in dinar-denominated assets.

A main plank of monetary policy is the defence of the dinar, which is pegged to the dollar, a policy that the International Monetary Fund (IMF) says has served the national economy well.

Even Jordanian expatriates whose earnings were in foreign currencies were switching part of their savings into the dinar attracted by interest as high as four per cent, bankers say.

The combined credit extended by the local banks to the private sector until the end of Dec grew a slight 2.6 per cent to 13.378 billion dinars from 13.044 billion dinars the same period a year earlier as local banks continued to tighten up credit.

The monetary authorities since November 2008 cut reserve requirements on commercial deposits, stopped issuing certificates of deposit, and cut the major benchmark lending rate to help spur growth by prodding banks to extend cheaper credit.

Banks have become more cautious about extending new loans as the global downturn's impact on the economy slows down growth and domestic consumption.

But the kingdom has not seen any steep falls in capital inflows or capital flight, officials say.

The country's 23 commercial banks have had minimal exposure to Western markets, and a strong supervisory system
run by an independent central bank has limited their currency, property and stock market exposure.

The well-capitalised banks had seen loan growth outpacing that of deposits during a boom period that saw years of rapid credit expansion, when the country's free-market reforms attracted billions of dollars of investments by both local and foreign investors, bankers say.

Loans grew by 15.5 per cent in 2008.-Reuters