Foreign bill discounting: banks asked to standardise Shariah practices of IBIs

The State Bank of Pakistan (SBP) on Thursday issued instructions to Islamic banks and conventional banks dealing in Islamic banking to standardise Shariah practices of Islamic banking institutions (IBIs) regarding foreign bill discounting. In a communiqué addressed to these banks, the State Bank issued the following instructions which will be applicable with immediate effect.
i. Salam of foreign currency is not a preferred transaction. However, if any IBI is interested in undertaking such transaction, the same shall be executed at the weighted average rate of previous day's transactions executed by the IBI with its clients.
ii. In case of Qard-e-Hasanah-cum-Wakalah. model is used for bill discounting, it shall be ensured that the agency fee charged for collecting the proceeds of the bill is based on Ujratul Mithl (market fee) and shall not be linked to the bill amount and the tenor etc. iii. IBIs may also use Murabaha, Musawama, Salam and Istisna-cum-Wakalah etc to meet financing needs of their customers independent of foreign bill.
The IBIs are advised to ensure compliance with the instructions in letter and spirit. Failure to comply with the same may invoke penal action under the provisions of Banking Companies Ordinance, 1962, the SBP said.-PR