SBP issues sharia governance framework

ISLAMABAD: State Bank of Pakistan (SBP) has published detailed rules on sharia governance, giving scholars greater independence from their banks' managements, ARY News has learnt.

The new governance rules describe the roles and responsibilities of Islamic banks' managements and their sharia scholars, who rule on whether activities and products at the banks follow religious principles.

To serve on a bank's sharia board, scholars must meet elegibility criteria set by the central bank and serve three-year terms which are renewable. They can work at a maximum of three Islamic banks in Pakistan at any one time.

Sharia board decisions are binding on the managements of Islamic banks, while any disputes are to be referred to the central bank's own sharia board for resolution.

Each Islamic bank must have a resident sharia board member to provide day-to-day advice, and this board member can only work with a single Islamic bank in Pakistan.

An external sharia audit of bank activities is required annually, together with a report which must follow a format defined in consultation with the Institute of Chartered Accountants of Pakistan (ICAP).