The Omani Primary Court that is hearing a case filed by the National Bank of Oman (NBO) against some of the bank's borrowers including certain shareholders on a loan programme in the mid-1990s, is understood to have ordered the bank to produce original loan documents.
The move gains significance in the wake of the recent decisions made by the boards of both Bank Muscat and NBO to merge.
The borrowers who talked to Gulf News argued that these loans were issued to them to trade in shares including that of NBO and was managed by the bank to do margin trading.
There were complaints raised by some borrowers that the way the bank managed their funds was questionable.
"These loans were part of the aggressive asset expansion plan initiated by the then chief executive of the bank, Aubyn Hill, which landed the bank in big trouble with a huge accumulation of bad loans. These loans had allegedly been charged interest of 13 per cent and upwards," they said.
Following Aubyn Hill's departure from the bank as CEO in 2002, there has been an unprecedented turnover of top brass in the bank.
"Given the unscrupulous practices of NBO in the mid to late 1990s, including the clear conflict of interest and probable breach of fiduciary duties by NBO's CEO over customer accounts, we will aggressively pursue recourse in the Omani courts and elsewhere," Thomas V. Sjoblom, US counsel who was retained by the borrowers, told Gulf News.
The bank's balance sheet shows that assets grew 400 per cent from 243 million riyals in 1991 to 951 million in 2001 when the bank posted a net loss of 7 million riyals.
The borrowers also said as these loans had turned bad owing to the huge loss in share trading, due to the sharp fall of Muscat Securities Market in the late 1990s, NBO came out with a plan to restructure these loans with the help of some UAE banks to get these loans off NBO's books.