The President/Chief Executive,
All Banks/DFIs,

Dear Sir/Madam,

DIRECTIVE UNDER SECTION 41 OF BCO, 1962

It has been noted that some banks are marketing their products by using the name of Islamic or Shariah compliant modes of financing without obtaining an Islamic banking license from State Bank of Pakistan. Such products often do not comply with the ‘Essentials of Islamic Modes of Financing’ issued by SBP through Press Release dated 15th April, 2005 notwithstanding the fact that such product offerings violate regulations and guidelines in force.

2. Therefore, all banks not authorized by issuance of an Islamic banking license from SBP are hereby directed under Section 41 of the Banking Companies Ordinance, 1962, not to offer products in the name of Shariah compliant products and services without first obtaining an Islamic banking license from SBP in terms of IBD Circular No. 2 of 2004 as amended from time to time.

3. Consequently, any recoveries made or penalties imposed by banks from their clients in excess of originally agreed pricing under the purported Shariah compliant products, must forthwith be refunded to respective customers within 15 days of this circular with confirmation in writing of the same to Director, Islamic Banking Department.

4. Failure to comply with these instructions may invoke penal action under the provisions of Banking Companies Ordinance, 1962.

5. Please acknowledge receipt.