Bank Muscat, Oman's largest lender, has delayed plans to launch a RO500 million ($1.3 billion) sukuk programme after the central bank rejected the proposal, a source at the bank told Reuters.

The regulator informed Bank Muscat in writing that it would not accept the plans in their current form, which involved the lender asking for a single approval to issue RO100 million a year for the next five years, the source said, adding that the central bank had concerns over plans to use the sukuk proceeds to increase personal lending.

"We will restructure the sukuk proposal and file for the approval again," the source said.

Net loans and advances at the bank reached RO6.4 billion in the six months to June 30, up 4.6 per cent on the corresponding period last year, Bank Muscat said as is reported second-quarter earnings on Tuesday.

No one from Oman's central bank was immediately available to comment on the Bank Muscat sukuk.

The plans for the sukuk to be issued in various tranches was backed by Bank Muscat's shareholders in March.-Reuters