Bank Muscat, Oman's largest lender, is planning to offer new shares to existing holders at a 25 percent discount to raise capital to fund its credit growth and venture into Islamic finance.

The bank, in which Dubai Financial Group has a 14.7 percent stake, will raise 96.7 million rials ($251.17 million) from the rights issue, a company document seen by Reuters showed.

As part of the issue, Bank Muscat is offering 226.5 million shares at 0.427 rials per share, the document said.

The lender's shares closed at 0.57 rials Sunday on the Muscat bourse. Rights issues are generally sold to current shareholders at a nominal discount.

Proceeds from the sale will be used to fund the bank's credit expansion and future foray into Islamic finance, the document said.

'The additional capital will also strengthen the capital adequacy of the issuer and enable readiness for adoption of Basel III when introduced,' the document stated.

While lenders in neighbouring Gulf states have ramped up sharia-compliant services in recent years, Oman has stood out by refusing to participate in the industry.

The central bank reversed that stance last year, partly to prevent the outflow of Islamic funds. Bank Muscat intends to set up a sharia-compliant banking arm to offer Islamic services, it said in December.

Bank Muscat posted a 20-percent growth in first-quarter net profit in April thanks to increased lending and a drop in impairments.

Omani and Gulf investors account for about 82 percent of the bank's ownership while the remainder is held by foreign investors.

The rights issue will be open from July 9 to July 23.  - Reuters