What do you mean by Islamic banking? Define Islamic banking?-What are the major features of Islamic banking?-What are the basic difference between Al Wadia & Mudarabda Account?-What are the present hurdles of Islamic banking?

1. What do you mean by Islamic banking? Define Islamic banking?

Ans. Islamic banking is a system of banking or banking activities that is consistent with Islamic law (Shariah) & guided by Islamic economics.   “An Islamic bank is a financial institution which identifies itself with the spirit of Shariah as laid down by the Holy Quran & the Sunnah to achieve its objectives, principles, practices & operations”  

• OIC

1. What are the major features of Islamic banking?

  Ans.  It is interest free.

• It distinguishes the economic activities into Haram & Halal.
• It is ethically guided operation with an objectives to promote partnership between depositor & entrepreneurs.
• It is a compliance of instruction from Allah, subnt and his Prophe

1. What are the basic difference between Al Wadia & Mudarabda Account?

Ans.  

1. What are the difference between Islamic banking & conventional banking?

Ans.

1. What are the present hurdles of Islamic banking?

  Ans.  Absence of separate Islamic banking ordinance.

• Islamic banking is a small part of Islamic economics * without implementation of Islamic economic, Islamic banking alone can not play it’s ideal role.
• Commitment to the shariah on the part of the banker & client is essential.
• Lack of coordination between Islamic Institutions.

1. Discuss the history of Islamic Banking?

  Ans. First started in 1963 in Egypt. IDB [Islamic Development Bank] established in 1980. Iran, Sudan & Pakistan has completely converted their banking system to Islamic banking. In Bangladesh, Islamic Banking starts with the IBBl in the year 1985.

1. How profit can be pre-fixed?

Ans.      Profit VS Interest Sale VS Investment Ration VS Rate .

1. In a PLS [profit & Loss Sharing] system, how Islamic banks always give profit?

Ans. Islamic banks use trade tools mostly used & approved by the Islamic scholars to avoid presence of interest.

1. What are the Finance/Investment tools of Islamic Banking?

Ans. Bank act as a seller.   Murabaha [Cost Plus]: buyer knows the cost & profit mark-up of the seller.   Musharaka [equity participation] : Its a partnership arrangement under PLS.   Bi-Muazzol: It’s a sale arrangement on “deferred payment” basis. Buyer does not know the cost of the goods.   Bi-Salam: An advance purchase arrangement. bank as a buyer.   Izarah: Is a lease arrangement.

1. What is Riab?

1. Every loan that draws interest is Riba.   2. “Simultaneous operation of conventional & Islamic banking under same roof”-is it possible.   3. The basic difference of an Islamic bank with a conventional bank is avoidance of interest from its transaction. Bank must ensure that from receiving the deposit [fund], to its subsequent investment & realization, all are done in the compliance with the sharia principles-this is core concern of an Islamic bank. Process of business is important-not the value.

1. What is the role of Sharia council ?

1. The role & status of sharia council are as follows:

1. Approval of any scheme, products or issue placed by the management, on account of sharia, for introduction in the market.
2. Approval of the operational & accounting process in light of shahria.
3. Advises management about status of sharia compliance in the bank.
4. Sharia council does not have any executive power.
5. Nomination, honorarium & tenure of sharia council members are fixed by the Board of Directors of the bank.
6. The sharia council directly reports to the Managing Director & if requires to the executive committee of the Board.

1. Does a separate sharia audit require?

1. Most of the Islamic banks are maintaining separate audit department for ensuring sharia compliance in teh bank. These auditors are called Muraquib. The success of the banks depends on the commitment of the bank not the efficiency of the Muraquib.

1. What are the available options of investment for a Islamic bank?

• Consumer finance [Retail banking] except any purpose loan.
• Higher purchase
• Lease/rental finance
• Real Estate development finance
• House building finance
• Equity finance/participation
• Merchant banking operation

1. What is the profit sharing ratio & how it is decided?

1. It depends on the banks management decision.

TBL will follow the profit sharing ratio @

• 65% will be distributed amongst the depositors as per weightage
• 33% will be retain by the Bank as service charge &
• 2% will be kept in the Risk fund

1. Describe the procedure of A/C conversion [From Conventional banking to Islamic Banking]?

  Ans.

• The client must approach to the branch requesting for transfer of his/her existing A/C to TIB in writing along with required papers.

• In case of Corporate, Partnership or Club-Society account the application must be submitted in their official pad.
• Only savings, current & STD accounts can be converted in to Islamic banking.
• Branch must verify the signature with their recored.
• Preserve full photocopy of the new account & forward the original to the designated TBL wing.

1. What is the current investment scheme of TIB?

1. 1. Barakat Car Scheme: The product is designed on the concept of Hire Purchase under sirkatul Melk [HPSM]. The clients agrees to a monthly payment to the bank. The payment contains two components- one is for usage [rent] while another is for gradual transfer of ownership [buy back of equity share]. When client have made full payment of agreed amount or in other words purchased full share of the car [asset], the client will become the sole owner of the car [asset]. This mode of Islamic banking related to finance, ownership & transfer is also known as Diminishing Musharaka.

What make the product sharia complient? Taking ownership through partnership [with investment] & then transferring the complete ownership again to the partner instead of simply lending money makes the product sharia compliant. The nature of the contract is “co-ownership” of the asset & not a loan.

2. IHSAN APARTMENT PURCHASE SCHEME & BARAKAT HOME CONSTRUCTION SCHEME: The product is designed on the concept of Hire Purchase under sirkatul Melk [HPSM]. The clients agrees to a monthly payment to the bank. The payment contains two components- one is for usage [rent] while another is for gradual transfer of ownership [buy back of equity share] When client have made full payment of agreed amount or in other words purchased full share of the asset/property, the client will become the sole owner of the asset/property. This mode of Islamic banking related to finance, ownership & transfer is also known as Diminishing Musharaka.

. What make the product sharia complient? Taking ownership through partnership [with investment] & then transferring the complete ownership again to the partner instead of simply lending money makes the product sharia compliant. The nature of the contract is “ co-ownership” of the asset & not a loan.    

1. Mention Deposit & Loan product of TIB?

1. Deposit product: Al-Wadia Current Account; Al-Wadia Term Deposit; Mudaraba Savings Account; Mudaraba Term Deposit; Mudaraba Monthly Deposit Scheme.

Loan & Investment: Barakat Car Scheme; Qard Card & Qard facility; Ishan Apartment purchase schem; Barakat House Construction Scheme.