SBP revises guidelines for Islamic banks on profit-sharing
The State Bank of Pakistan (SBP) has
revised its guidelines for profit and loss distribution and pool management for
Islamic Banking Institutions (IBIs), mandating that profit on PKR saving
deposits must be at least 75% of the weighted average gross yield of all pools
within the IBI.
Effective from January 1, 2025, this
new directive excludes deposits from financial institutions, public sector
enterprises, and public limited companies. The SBP’s Islamic Finance Policy
Department issued a circular detailing these changes to all Islamic banks and
conventional banks with Islamic banking branches.
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The updated methodology for
calculating the gross yield specifies that the monthly gross earnings of a pool
should be divided by its monthly average assets, excluding fixed assets.
However, pools created for Shariah-compliant standing ceiling facilities and
open market operations (OMOs) will not be included in the weighted average
gross yield calculation.
Additionally, Clause 5.2.1, which
previously allowed IBIs to waive up to 60% of their Mudarib share as Hiba to
meet market expectations in case of lower returns, has been revised. The
specific 60% threshold has been replaced with a more flexible term, “a part
of.” Another change allows IBIs to offer Hiba specifically to saving
account holders to meet minimum profit rate requirements, rather than
distributing it across all deposit categories.
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The SBP originally introduced these
instructions in November 2012 to enhance transparency and standardize profit
and loss distribution practices across Islamic banking institutions. The latest
revisions aim to further align IBIs’ operations with market needs and Shariah
compliance.
Source: APP