SBP mandates 75% profit on PKR savings for Islamic Banking Institutions

November 26, 2024 (MLN): The State Bank of Pakistan (SBP) has decided that Islamic Banking Institutions (IBIs) shall pay profit on their PKR saving deposits equivalent to at least 75% of the weighted average gross yield of all pools of an IBI.

The deposits on which this profit will be imposed include those of financial institutions, public sector enterprises, and public limited companies.

Furthermore, to determine the gross yield of each pool, the monthly gross earnings of the pool shall be divided by the monthly average assets of the pool (excluding fixed assets).

However, the pool(s) created by IBIs for Shariah-compliant standing ceiling facilities and Shariah-compliant open market operations (OMOs) will be excluded while calculating weighted average gross yield of pool(s).

Accordingly, the following revisions have been made in the “Instructions for Profit & Loss Distribution and Pool Management for IBIs” issued vide IBD Circular No. 03 dated November 19, 2012 and IBD Circular Letter No. 01 dated January 01, 2013:

i.  Clause 4.2.3 shall stand deleted.

ii. Clause 5.2.1 shall be replaced with “IBI may forego a part of its Mudarib share as hiba to meet the market expectation in case of lower than expected/market returns earned by the pool. However, IBIs maintaining PER will reduce their Mudarib share only if the PER is insufficient to improve the profit payouts to the depositors.”

iii. Clause 5.2.2 shall be replaced with “If needed, IBIs may give hiba to saving account depositors to meet the requirement of minimum profit rate.” 

To note, the above instructions shall be effective from January 01, 2025.

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