The readers are well aware that the banking system was switched over to the Islamic banking w.e.f January 1985.
Under the Banking Companies Ordinance 1962, SBP in its instruction to all Banking Companies, DFI's had directed that no overdue panel interest or markup on markup shall be charged by the banking companies DFI's from January 1985. Attention is drawn to BCD Circular letter No 32 of 26th November 1984 and the instructions contained therein are very clear.
At the same time, a reference is also made to Circular No 13 dated 20th June 1984 regarding the elimination of (RIBA) from the banking system.
Despite these clear instructions, violation is being made by all banks, including the IDBP. No banking company has applied these instructions in letter and spirit. What they do is that they create separate loans for the non-paid markup without the consent of the borrower.
The markup on markup is hidden by way of "capitalisation" a clear deviation from the Islamic banking law.
These financial institutions, in order to declare fictitious profits are involved in this irregular practice, resulting in a large number of industrial units being closed and thousands of employers rendered jobless, while a large number of cases are pending in banking courts.
Most of the counsels engaged in the cases are either ignorant of the Banking law and practice or misleading their clients in fighting these cases at various levels. I feel that if the markup on markup should be disallowed by the honourable courts, a sizeable amounts shall be recovered from the, borrowers.
Let the banks abandon their unlawful demands of markup on markup, under the garb of "capitalisation."