Bank Muscat, Oman's largest bank by assets, will set up a sharia-compliant banking arm, it said in a statement, becoming the latest financial institution to announce plans to operate in the Islamic finance sector.

Operating under the Meethaq brand name, the bank will function independently from the conventional arm and has appointed a three-member sharia board.

No timeframe for the start of operations was given, with the new bank still subject to the Central Bank of Oman's approval, the statement added.

Oman said in May it would allow Islamic banking in the country for the first time, in an attempt to keep investment funds in the Gulf state and grab a share of the rapidly growing industry.      

Earlier this month, Standard Chartered said it was studying whether to offer Islamic banking in Oman. So far, two new Islamic banks have been granted banking licences - Bank Nizwa and Al Izz International Bank - while conventional lenders are also allowed to establish Islamic banking windows, as Bank Muscat has done. - Reuters