KARACHI: Pakistan’s central monetary establishment has issued guidelines covering how banks that wish to be fully-fledged sharia compliant can reach that status, setting a three-year time frame for applicants to complete the process.
The rules objective to spice up up the growth of Islamic banking throughout the Muslim-majority country. The sector enjoys double-digit enlargement then again lags standard banks relating to size and profitability.
Islamic banks apply religious regulations identical to bans on interest and herbal monetary speculation, ruling out the use of interest-based financial gear identical to bonds and treasury bills.
Eligible applicants must have present Islamic finance operations and the conversion process must get began within six months of approval, the central monetary establishment mentioned in a spherical.
After the conversion of standard branches, the applicant can then apply for a full-fledged Islamic banking license.
Converting once more to conventional banking operations may not be allowed, the spherical mentioned.
Such conversions are unusual in Islamic finance then again are noticed so as to increase the scale of Islamic banking and widen its reach into under-served rural areas.
Islamic banking in Pakistan, the second most populous Muslim-majority nation after Indonesia, just lately accommodates five full-fledged Islamic banks and 16 standard banks offering Islamic financial products.
As of March, they held assets worth 1.9 trillion rupees ($17.9 billion), a 16 percent increase from a year earlier and 11.7 percent of total banking assets.
Then again, their capitalization and profitability ratios keep beneath the trade reasonable in Pakistan.