Draft Instrucions & Guidelines for Shariah Compliance in Islamic Banks

Additional conditions and controls in their

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additional conditions and controls in their procedures for the sake of more effective Shariah Compliance and prudence. G. Use of Charity Fund: 1. Every IBI will create a Charity fund in which income of the IBIs from non-Shariah compliant sources or penalties and late payment charges received from clients in default or overdue cases etc. will be credited. The existing Prudential Regulations G-3 for Corporate/Commercial Banking will not be applicable to the Charity Fund created under these instructions related to Shariah Compliance. The amount in this fund will be utilized for charitable and social welfare purposes in accordance with the policy vetted by Shariah Advisor and approved by the Board of Directors, in case of locally incorporated IBIs or management in case of foreign banks having IBBs. A copy of this policy shall be submitted to the Islamic Banking Department of SBP within a period of seven days of its approval by the board. Any modification in this policy shall also be communicated to State Bank within a period of seven days of the change. 2. The IBIs shall maintain proper accounts and records regarding all transactions relating to Charity Fund and disclose in their annual audited financial statements a Statement of Sources and Uses of Charity Fund. H. Introduction of New Products and Services: The IBIs shall prepare a full set of documents including agreements, process flows, checklists and manuals pertaining to the deposit, investment and financing products being offered by them, duly vetted by the Shariah Advisor. A certificate from the Shariah Advisor will be submitted to SBP along with structure and salient features of the product before offering it to the customers. I. Schedule of Service Charges: In partial modification of BPD Circular 33 of 2003, the IBIs shall be required to provide original copy of the printed schedule of charges to the Islamic Banking Department in addition to the Banking Policy & Regulations Department of the State Bank of Pakistan, at least seven days before the commencement of the related half-year. IBIs shall ensure meticulous compliance of the following instructions while submitting schedule of charges to SBP: i) Islamic Banking Branches of Conventional banks shall have a separate set of Schedule of Charges for their business. ii) The set of Schedule of Charges submitted by the IBIs shall be signed by the bank’s Shariah Advisor as an endorsement of Shariah compliance. iii) If IBIs want to fix different rate of charges for various categories of clients (e.g. according to volume of business etc.), then such categories should be clearly defined by the IBI. ÕÕÕÕÕ Draft Instructions and Guidelines for Shariah Compliance Page 4 of 16
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STATE BANK OF PAKISTAN ISLAMIC BANKING DEPARTMENT DRAFT GUIDELINES FOR SHARIAH COMPLIANCE IN ISLAMIC BANKING INSTITUTIONS I. Shariah Compliance: In order to strengthen the Shariah compliance mechanism within IBIs and to ensure that
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  • Fall '11
  • GARYMILLER
  • Finance, ........., Shariah Advisor, islamic banking department, Shariah Advisors

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