DUBAI, Jan 11 (Reuters) - Oman is looking to raise up to $2 billion with a loan arranged mostly by local and regional lenders, as international banks tread carefully due to the deterioration of its credit profile, sources said. Oman started talks with banks for a new loan of at least $1 billion in November, sources told Reuters at the time, as it geared up for heavy debt redemptions. It is now working with a group of banks to raise a $1.1 billion facility which could go up to $2 billion in size depending on market appetite, two sources familiar with the matter said. The banks leading the deal are HSBC, Mashreqbank, Gulf International Bank, Bank Muscat and Bank Dhofar, said the sources. The loan, now being marketed to a wider group of lenders, has a 15-month maturity with the possibility to extend it by an additional 12 months at the borrower’s discretion. HSBC declined to comment. The other banks and Oman’s ministry of finance did not respond to comment requests. The presence of only HSBC among the leading group indicates international banks have become more cautious about their exposure to Oman due to its downward credit trajectory over the past few years, as lower oil prices hammered state finances, said the sources. For smaller regional banks, Oman - rated sub-investment grade by all major credit ratings agencies - represents instead a good opportunity as its borrowing costs have increased. “The overall landscape of lending in Oman has been changing,” said one of the sources. Part of the new loan will refinance a $1 billion debt facility due in January, the same source said. Oman’s external debt maturing this and next year amounts to $10.7 billion, or about 7.5% of gross domestic product, S&P Global Ratings has said. Oman expects a 2021 budget deficit of 2.24 billion rials ($5.82 billion) this year. To make up the shortfall the government aims to raise about 1.6 billion through borrowing and draw 600 million from its reserves. ($1 = 0.3847 Omani rials) (Reporting by Davide Barbuscia, editing by Ed Osmond)