KARACHI, Nov 14: Islamic banks will have to maintain six per cent special cash reserve in addition to cash reserve requirement (CRR) against FE-25 deposits, says a State Bank circular issued here on Tuesday.

The State Bank has prescribed the mechanism for maintenance of reserve requirements against FE-25 deposits.

Islamic banks (IBs) will maintain CRR against the FE-25 deposits in a current account in US$ with the SBP. Currently this requirement is five per cent of total FE-25 deposits to be maintained on daily basis.

Conventional banks having Islamic banking branches (IBBs) will be required to open a separate current account in US$ with the SBP for the purpose, the circular said.

In addition to the CRR, IBs or IBBs will maintain special cash reserve at six per cent of their total FE-25 deposits in the same current account in US$ on non-remunerative basis till some Shariah compliant foreign currency instruments are developed.

“Therefore in all, the IBs or IBBs will maintain 11 per cent of their FE-25 deposits in this current account on daily basis in lieu of CRR and SCR,” said the SBP.After the establishment of Islamic banks and Islamic banking branches of conventional banks, in order to ensure Shariah compliance and segregation of funds in case of IBBs, the reserve requirements for FE-25 deposits mobilised by these IBs or IBBs have been advised to them individually.

The circular emphasised that before accepting any FE-25 deposits, IBs or IBBs are required to send details of the scheme to Islamic banking department of the SBP along with profit sharing mechanism for the foreign currency saving and term deposits schemes as well as fund management policy duly vetted by their Shariah adviser.

The SBP (BSC) will open US$ current account of IBs or IBBs with prior clearance from the Islamic banking department, SBP.