Karachi: The State Bank of Pakistan (SBP) has asked for adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Shariah Standards No. 34 relating to hiring of persons and No. 54 relating to revocation of contracts by exercise of a cooling-off option.

With a view to further strengthening Shariah-compliance framework and harmonize the Shariah practices in Islamic Banking Industry (IBI), the SBP has instructed all Islamic banks, Islamic Banking Subsidiary and all conventional banks having Islamic Banking Branches to adopt the AAOIFI Shariah Standards No. 34 (Hiring of Persons), and No. 54 (Revocation of Contracts by Exercise of a Cooling-Off Option) with immediate effect.

Hiring of Persons refers to the contract through which a service/work of a natural or a legal person is obtained against a specific amount. The service thus obtained could be specific or described as an obligation, such as educational, health and consultancy services.

While, revocation of contracts by exercise of a Cooling-Off option means revocation due to stipulation refers to the termination of a valid and binding contract by virtue of a stipulation in the contract giving either of the parties the option to revoke the contract.

According to SBP, the adoption of these Standards is in addition to applicable regulations, instructions and directives issued by SBP from time to time.

The SBP has warned that failure to comply with these instructions may invoke penal action under the relevant provisions of the Banking Companies Ordinance 1962.

Copyright Business Recorder, 2024