ISLAMABAD: The National Assembly passed, “The Banking Companies (Amendment) Bill, 2024” to strengthen legal framework for Islamic banking in the country and “The Seed (Amendment) Bill”, to establish a National Seed Development and Regulatory Authority.
The Lower House of the Parliament passed these two bills by suspending the business of Private Members’ day of the House.
Federal Minister for Science and Technology Dr Khalid Maqbool Siddiqui tabled the bills separately in the House for passage. The House passed the bills with majority. The Senate has already passed the Banking Companies (Amendment) Bill, 2024.
According to the Banking Companies (Amendment) Bill, 2024, “Islamic banking institutions shall undertake business and operations consistent with the Principles of Shariahand these shall include: (a) Accepting Islamic Deposit Accounts on modes, based on the Principles of Shariah; as specified by the State Bank. (b) Accepting Restricted and Unrestricted Investment Accounts on modes, based on the Principles of Shariah, as specified by the State Bank. (c) . Doing such businesses as are prescribed in section 7 of this Ordinance subject to conformity with the Principles of Shariah; as specified by the State Bank.
“Therelationship between an Islamic banking institution or Islamic financial institution and its customers with regard to any transactions or arrangements that are in conformity with the Principles of Shariah shall be determined in accordance with the contractual terms governing such transactions orarrangements.”
“Shariah governance shallrefer to the set of institutional and organizational arrangements at an Islamic. banking institution or Islamic financial institution through which effective independent oversight of compliance with the Principles of Shariah over each of the undertaken activities structures and processes is ensured as per the State Bank’sregulations, directives, instructions, notifications, circulars and guidelines.”
“Ensuring an effective Shariah governance framework shall be one of the key responsibilities of the Board of Directors of the Islamic Banking Institution Islamic financial institution.” The statement of objects and reasons of the bill says that the Banking Companies Ordinance (BCO), 1962 provides a comprehensive framework for the banking industry in Pakistan. In the wake of dynamic nature of the bank sector, State Bank of Pakistan (SBP) continuously works to refine and update this important legislation to align it with international standards, best practices and changing financial landscape.
To provide explicit coverage to the legal framework for Islamic banking business in BCO, 1962, separate chapter on Islamic banking has been drafted. These Islamic banking related amendments will not only strengthen the legal framework for Islamic banking but will also be the first step as per the Federal Shariat Court’s directions and will pave the way towards interest free economy.
Some other amendments being proposed will strengthen SBP’s regulatory capital regime, promote financial inclusion, facilitate convenient access to unclaimed deposits and relevant data to the general public; and make the process of filing complaints with the Banking Mohtasib simple and swift.
According to statement and objects and reasons of the Seed (Amendment) Bill, the Authority has been equipped with all requisite powers and functions, including, inter alia, legal character as a body corporate, power to employ modern methods, ability to transact with governmental and non-governmental entities, and integration of an effective regulatory regime.
Copyright Business Recorder, 2024
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