DUBAI - Outflows of deposits from Qatar's banking system slowed in September as the impact of sanctions imposed by other Arab states began to fade, central bank data showed on Monday.

Since June, when Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and trade ties with Qatar, banks and investors from those four countries have been pulling deposits from Qatari banks.

Qatar's government has responded by depositing billions of dollars of its own money into Qatari banks to prevent them from being damaged. Much of the money came from the country's sovereign wealth fund, the Qatar Investment Authority.

Data for September, however, suggested the other countries have now pulled most of their money out of Qatar, so there are relatively few deposits left to be withdrawn.

Foreign customers' deposits at banks in Qatar - the vast majority in the form of foreign-currency deposits - shrank by 6.2 billion riyals ($1.7 billion) in September from the previous month to 142.8 billion riyals.

That decline was slower than falls of 8.2 billion riyals in August, 13.4 billion in July and 14.0 billion in June.

As a result, the government saw less need to place additional funds with Qatari banks, the data showed. The Qatari public sector's deposits with local banks increased by only 7.2 billion riyals in September, after rises of more than three times that amount in each of the previous three months.

Monday's figures also showed Qatari banks' borrowing from foreign banks had stabilised, after falling sharply in the aftermath of the sanctions as banks from the four Arab countries stopped extending loans.

Qatari banks owed foreign banks 169.5 billion riyals in September, almost unchanged from 169.8 billion in August. In May, before the sanctions, the figure stood at 234.5 billion riyals.

(Reporting by Andrew Torchia; Editing by David Holmes) ((; +9715 6681 7277; Reuters Messaging: