The State Bank of Pakistan has mandated that Islamic Banking Institutions (IBIs) pay profit on their PKR saving deposits at a rate equivalent to at least 75 per cent of the weighted average gross yield of all pools of an IBI.
The SBP’s regulation excludes deposits held by financial institutions, public sector enterprises, and public limited companies.
To calculate each pool’s gross yield, the monthly gross earnings will be divided by the pool’s monthly average assets, excluding fixed assets. Notably, pools created by IBIs for Shariah-compliant standing ceiling facilities and open market operations will not be included in the weighted average gross yield calculation.
Significant updates have also been made to the “Instructions for Profit & Loss Distribution and Pool Management for IBIs”, originally issued under IBD Circular No. 03, dated November 19, 2012, and IBD Circular Letter No. 01, dated January 1, 2013. These revisions include:
- The deletion of Clause 4.2.3.
- Clause 5.2.1 has been replaced with a new guideline that allows an IBI to reduce its share of Mudarib (profit) as hiba (gift) to align with market expectations if pool returns are lower than anticipated. However, this only applies if the Profit Equalization Reserve (PER) is insufficient to enhance profit payouts to depositors.
- The amendment of Clause 5.2.2 permits IBIs to offer hiba to saving account depositors to satisfy the minimum profit rate requirement.
Read: Pakistan Sets 2028 Deadline for Eliminating Riba in Banking
The new SBP IBI regulations will take effect on January 1, 2025, marking a significant shift in the way profits are distributed to savings account holders in the Islamic banking sector.
