In a surprising move the UK's third-largest bank by market value after HSBC and RBS, Barclays is reported to be on the verge of clinching a deal with Middle Eastern governments like Qatar and Abu Dhabi to secure capital injection worth £7.3 billion to increase its balance after spurning the UK government's bailout to help banks recapitalise, when regulators insisted that it raise its capital reserves to more than £10 billion by issuing equity, selling of some of its assets, slashing dividend and capping executive perks.

According to media reports after resolving to raise money on its own terms Barclays approached a series of private investors like the Qatar Investment Authority, Abu Dhabi-based sovereign wealth fund and even Russia's VTB and Sberbank banking groups and the Libyan Investment Authority, before ruling out any capital injection from th elast three as the discussions seems to have led nowhere.

Barclays said on its website, the capital raising, which is subject to approval by Barclays shareholders, will be effected through an issue of £3 billion of reserve capital instruments, with an associated issue of warrants, and an issue of up to £4.3 billion of mandatorily convertible notes.

Barclays' negotiating team led by Roger Jenkins, an assistant to Barclays executive Robert Diamond, is said to have been holding discussions with Qatar and Abu Dhabi for several weeks, and is now reported to be close to finalising £7.3 billion loan, which it is expected to announce today or by the weekend.

Qatar's sovereign wealth fund, the QIA, which has £30 billion in its kitty, which could rise to £60 billion by 2010 from gas exports, had announced in February this year that it would invest $15 billion on overseas financial institutions over the next two years. It already holds a 6-per cent stake in Barclays after having invested £1.4 million when Barclays raised £4.5 billion to help shore up its balance sheet earlier this year and.

In addition, Challenger, the investment company of the Qatari ruling family, will also punp in an additional £400 million for a 2-per cent stake in Baeclays.

This year, Barclays also sold stakes to China Development Bank and Japan's Sumitomo Mitsui Financial Group.

Barclays, which had a significant exposure to investment banking through Barclays Capital had insisted with a surprised UK government that it would raise the required money on its own at a time when UK banks were forced to raise fresh capital in exchange for significant stakes to the government as part of the UK government's bailout scheme. Seven banks and mortgage lender HBOS had signed up to raise their capital reserve resulting in Royal Bank of Scotland, Lloyds TSB and HBOS collectively accepting £37 billion of emergency funding.

If Barclays is able to secure the loan from the Middle East investors then it will not need to raise £3 billion in preference shares by the end of the year and a further £3.5 billion of ordinary shares by March next year.

Also a loan from external sources will help the bank in avoiding the government's strict government investment conditions which puts a cap on bonus to its employees, dividend payments to board members and the ouster of Barclays's chief executive, John Varley.

Barclays had bought collapsed Lehman Brothers investment banking and capital markets operations in the Americas, including its headquarters in New York, for $1.54 billion last month.