Section 39E: Shariah Governance

39E. Shariah Governance.__ (1) Shariah governance shall refer to the set of institutional and organizational arrangements at an Islamic banking institution or Islamic financial institution through which effective independent oversight of compliance with the Principles of Shariah over each of the undertaken activities, structures and processes is ensured as per the State Bank's regulations, directives, instructions, notifications, circulars and guidelines. (2) Ensuring an effective Shariah governance framework shall be one of the key responsibilities of the Board of Directors of the Islamic banking institution or Islamic financial institution (3) An Islamic banking institution or Islamic financial institution shall___ (a) Comply with all Shariah regulatory standards and requirements concerning their operations as specified in the State Bank's regulations, directives, instructions. notifications, circulars and guidelines. (b) Comply with any requirements related to Shariah governance framework as specified in the State Bank's regulations, directives, instructions, notifications, circulars and guidelines. (4) A banking company undertaking business and operations through dedicated Islamic banking branches after getting a separate license shall have policies, internal systems, procedures, and controls as per the State Bank's regulations, directives, instructions, notifications, circulars and guidelines to ensure that:__ (a) all the transactions, arrangements and dealings of the Islamic banking branches are in accordance with the Principles of Shariah; (b) banking business and operations of dedicated branches are property segregated; and (c) the banking company provides adequate disclosures in this regard.

Effective date: 1962-06-07

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