The overall liquidity situation in Saudi Arabia, which started easing following the Government’s successful foray into international bond market, improved further during October, a report said.

The improvement was seen in a number of broader areas such as money supply, driven by an increase in deposits, which also helped in lowering the loan-to-deposit ratio, added the Economic Research released by Al Rajhi Capital, a leading financial services provider in the kingdom.

Saudi three month interbank rate also dropped by 30 points from its peak in October to the levels that was seen in early May 2016.

“Our channel checks suggest that the premium which some banks used to pay over SAIBOR for bulk deposits have dropped from 120-150 bps to around 10-30 bps now, showing easing pressure on banks to accumulate deposits,” the Al Rajhi report said.

Banks’ improved situation is also reflected in loan-to-deposit ratio dropping below the central bank limit of 90 per cent after remaining above the limit for four months. Banks’ decision to defer personal loan repayments for October in view of the rescheduling of personal loans of Government employees after the cut in allowances also seemed to have helped the liquidity situation.

The government’s decision to start releasing SR100 billion ($26.6 billion) in delayed payments to contractors in early November is also expected to further support liquidity situation.

As private sector credit growth remains weak (almost stagnant since May), the liquidity situation is unlikely to weaken towards the year end in view of the recent measures and the overall sentiment, the report said.- TradeArabia News Service