GUIDELINES FOR CONDUCTING ISLAMIC BANKING
Introduction to Islamic Banking
Islamic Banking has experienced a phenomenal growth and expansion in Bangladesh
in the backdrop of strong public demand and support for the system along with its gradually
increasing popularity across the world. As a result, a number of full-fledged Islamic Banks
has been established, while a good number of conventional banks have come forward to offer
services compliant with Islamic Shariah through opening of Islamic branches along with
conventional ones. There is also a trend of conversion of conventional banks into Islamic
bank.
It has, therefore, become necessary to ensure that activities of the fast growing
Islamic Banks are carried out properly and uniformly according to the principles of Islamic
Shariah. With this end in view, Bangladesh Bank constituted a Focus group comprising
representatives of the central Bank, a number of Islamic Banks and the Central Shariah Board
for Islamic Banks of Bangladesh to formulate an integrated guideline for conducting banking
business of the Islamic Bank/Islamic bank branches of conventional banks. Based on the
recommendations of the Focus group this guideline embodying different terminologies used
in Islamic Banking operations, definitions of the terminologies, the principles and modes of
deposits and investments has been prepared. It also dwelt upon the issues of liquidity,
maintenance of books of accounts and preparation of financial statements and other related
issues. This guideline has been prepared mainly on the basis of Banking Companies Act
1991, Companies Act 1994 and Prudential Regulations of Bangladesh Bank. However, this
guideline should be treated as supplementary, not a substitute, to the existing banking laws,
rules and regulations. Incase of any point not covered under this Guideline as also in case of
any contradiction, the instructions issued under the Banking Companies Act and Companies
Act will prevail. 2
Definitions of Terms used in Islamic Banking Operations
The following terms as used in this guideline, if not repugnant to the subject or
affairs, shall have the following meaning:
a. "Shariah" means such rules and regulations as have their origin in the holy Qur'an and
Sunnah to govern all aspects of human life.
b. "Islamic bank" means such a banking company or an Islamic banking branch(es) of a
banking company licensed by Bangladesh Bank, which follows the Islamic Shariah in
all its principles and modes of operations and avoids receiving and paying of interest
at all levels.
c. "Islamic Banking Business" means such banking business, the goals, objectives and
activities of which is to conduct banking business/activities according to the
principles of Islamic Shariah and no part of the business either in form and substance
has any elements not approved by Islamic Shariah.
d. "Branch or Branch Office" means any branch or Branch Office of Islamic Bank
Company or office or Branch of such interest based conventional Banks which run
Islamic banking business.
e "Depositor" means some one who holds with any Islamic Banking Company any
account namely Current account based on Al-Wadiah principles, Savings or long and
short term deposit accounts under Mudaraba principles.
f. "Investment" means any such modes of financing which Islamic Bank Company does
in accordance with principles of Shariah or as per the Shariah approved modes like
Mudaraba, Musharaka, Bai-Murabaha, Bai-Muajjal, Istisna, Lease, Hire-purchase
under Shirkatul Melk, etc.
g. "Client" means such a person or institution who/which has any business relationship
with Islamic Banking Company.
h. "Compensation" means such financial penalty as is imposed by a Islamic Banking
Company over and above the amount of installment when a client fails to repay
Bank's investment on due dates as per the agreement executed by him.
Collected
