The
CEOs/Country Heads
Islamic Banks/
Banks having Islamic Banking Branches
Dear
Sir/Madam,
INSTRUCTIONS
AND GUIDELINES FOR SHARIAH COMPLIANCE IN
ISLAMIC BANKING INSTITUTIONS
State
Bank is promoting and developing Islamic banking industry
in Pakistan as a parallel system and this sector is witnessing
tremendous growth and increased recognition from the stakeholders.
In order to ensure effective Shariah compliance in the Islamic
banking industry and maintain trust of the depositors and
other stakeholders on the system, a proper Shariah compliance
mechanism has been put in place by SBP.
2.
In pursuance of its goal to further strengthen the Shariah
compliance framework in the Islamic banking industry, ‘Instructions
and Guidelines for Shariah Compliance’ have been finalized
in consultation with various stakeholders which have also
been reviewed and approved by the SBP Shariah Board. It
may be noted that these Instructions and Guidelines for
Islamic Banking Institutions (IBIs) are in addition to current
Prudential Regulations, guidelines and other circulars and
directives issued by different departments of SBP and are
not replacing them by any means, unless specifically mentioned
otherwise.
3.
The ‘Instructions for Shariah compliance in IBIs’,
enclosed herewith as Annexure-1, cover various areas related
to appointment, removal and working of Shariah Advisors;
conflict resolution in Shariah rulings; Shariah compliant
modes; use of charity fund, introduction of new products
and services and schedule of service charges etc. It may
be noted that essentials of Islamic modes of financing,
earlier issued by SBP through a press release on April 15,
2005, have now been augmented and made part of these instructions
and appended as Appendix-A thereto.
4.
Furthermore, in exercise of the powers conferred by clause
(o), subsection (1) of section 7 of Banking Companies Ordinance,
1962, State Bank of Pakistan through these Instructions
has specified Shariah-compliant modes of banking and finance
for IBIs. Annexure-I of BCD Circular No.13 dated 20th June,
1984 shall stand replaced by section ‘E’ of
these instructions insofar as it relates to IBIs. Further,
as the requirements of IBD Circular No. 1 dated March 05,
2007 have been made a part of these Instructions, therefore
the said circular shall stand withdrawn.
5.
Failure to comply with the enclosed Instructions may invoke
penal action under the provisions of Banking Companies Ordinance,
1962.
6.
The ‘Guidelines for Shariah compliance in IBIs’
enclosed herewith as Annexure-2 are meant for providing
guidance in areas like Shariah compliance, internal Shariah
audit, investment in shares, policy for profit distribution
with PLS account holders and financial reporting and general
disclosure etc. Necessary flexibility has been provided
in these guidelines and IBIs can set up the suggested systems
and procedures keeping in view the size and scope of their
operations. These guidelines are being issued on “comply
or explain basis” and IBIs shall record reasons in
writing for non-compliance with any of these guidelines.
7.
These Instructions and Guidelines would be applicable with
immediate effect.
8.
Please acknowledge receipt.
Encl:
1. Annexure-1
- Instructions for Shariah Compliance
2. Annexure-2
- Guidelines for Shariah Compliance