KARACHI, March 16: With a view to bring the Islamic Banking parallel to the conventional banking, the State Bank of Pakistan has formulated guidelines which would strengthen rules of Shariah compliance.

The formulated draft instructions and guidelines for Shariah compliance in Islamic banking institutions (IBIs) will further strengthen the Shariah compliance framework in Islamic banking institutions, said a statement issued by the SBP on Friday.

The draft instructions for Shariah compliance in Islamic banking institutions cover areas related to appointment, duties and responsibilities and report of Shariah advisor; conflict resolution in Shariah rulings; permissible modes of financing and investment; essentials of Islamic modes of financing; use of charity fund; introduction of new products and services and schedule of service charges.

The draft guidelines for Shariah compliance in Islamic banking institutions cover areas like Shariah compliance; internal Shariah audit; investment in shares; policy for profit distribution with PLS account holders and financial reporting and general disclosure.

“The draft instructions and guidelines have been sent to key stakeholders, including the Pakistan Banks’ Association and Islamic Banking Institutions for comments and feedback within 15 days,” said the SBP press statement.

A copy of the draft has also been placed on SBP website: www.sbp.org.pk for comments and feedback from the general public and all concerned.

The SBP is in the process of developing Islamic banking as a parallel system along with the conventional banking. In order to ensure effective Shariah compliance in the Islamic banking industry and to maintain trust of the depositors and other stakeholders in the system, a Shariah compliance mechanism has been put in place by the State Bank.

The above instructions and guidelines have been formulated in order to further strengthen the Shariah compliance framework.