Section 39B: Definitions

Plain-Language Summary

A general explanation to aid understanding. The official statutory text appears below.

This section defines the following terms used in The Banking Companies Ordinance, 1962: • Islamic Deposit Account — an account in which a sum of money is accepted by an Islamic banking institution as per related agreed terms and conditions, consistent with applicable regulations of the State Bank • Islamic Deposit Account Holder — a person having Islamic deposit account at an Islamic banking institution • Investment Account — an account in which a sum of money is accepted by an Islamic banking institution in accordance with the Principles of Shariah and shall be payable by the Islamic banking institution as per related agreed terms and conditions. It includes following categories of accounts: • Unrestricted Investment Account — an account in which a sum of money is accepted in accordance with the Principles of Shariah on a profit and loss sharing basis and which shall be managed or invested at the absolute discretion of the Islamic banking institution in accordance with the Principles of Shariah • Restricted Investment Account — an account in which a sum of money is accepted in accordance with the Principles of Shariah and which shall be managed or invested on the basis of an agreement on a specific investment mandate between the Islamic banking institution and the investment account holder, in accordance with the Principles of Shariah • Investment Account Holder — a person having an investment account at an Islamic banking institution • Ordinance — Banking Companies Ordinance, 1962 (LVII of 1962) • Shariah — the injunctions of Islam as laid down in the Holy Quran and Sunnah • Islamic financial institution — the financial institutions covered in section 3A and permitted by the State Bank to conduct their business and operations in accordance with Principles of Shariah This is the official statutory text, shown as written — it is not a paraphrase or a legal opinion. Consult a verified lawyer to see how it applies to your specific situation.

39B. Definitions.__ The terms defined herein would only be applicable for this part and notwithstanding anything contained to the contrary in this Ordinance, the following defined terms will have the meaning assigned to them under this part:__ (a) "Islamic banking institution" means: (i) a full-fledged Islamic banking company, where its entire business and operations are in accordance wit the Principles of Shariah (as defined herein below) and is licensed by the State Bank for this purpose; (ii) an Islamic banking subsidiary of a banking company, where the entire business and operations of this subsidiary are in accordance with the Principles of Shariah and is licensed by the State Bank for this purpose; or (iii) dedicated Islamic banking branch or branches of a banking company, where the entire business and operations of the branch or branches are in accordance with the Principles of Shariah and is licensed by the State Bank for this purpose. (b) "Islamic Deposit Account" means an account in which a sum of money is accepted by an Islamic banking institution as per related agreed terms and conditions, consistent with applicable regulations of the State Bank; (c) "Islamic Deposit Account Holder" means a person having Islamic deposit account at an Islamic banking institution; (d) "Investment Account" means an account in which a sum of money is accepted by an Islamic banking institution in accordance with the Principles of Shariah and shall be payable by the Islamic banking institution as per related agreed terms and conditions. It includes following categories of accounts: (i) "Unrestricted Investment Account" means an account in which a sum of money is accepted in accordance with the Principles of Shariah on a profit and loss sharing basis and which shall be managed or invested at the absolute discretion of the Islamic banking institution in accordance with the Principles of Shariah. (ii) "Restricted Investment Account" means an account in which a sum of money is accepted in accordance with the Principles of Shariah and which shall be managed or invested on the basis of an agreement on a specific investment mandate between the Islamic banking institution and the investment account holder, in accordance with the Principles of Shariah. (e) "Investment Account Holder" means a person having an investment account at an Islamic banking institution; (f) "Ordinance" means Banking Companies Ordinance, 1962 (LVII of 1962); (g) "Shariah" means the injunctions of Islam as laid down in the Holy Quran and Sunnah; (h) "Islamic financial institution" means the financial institutions covered in section 3A and permitted by the State Bank to conduct their business and operations in accordance with Principles of Shariah; (i) "Principles of Shariah" mean the following principles governing Islamic banking and finance: (i) prohibition of all forms of Riba and Usury; (ii) prohibition of transactions featuring excessive uncertainty (Gharar) and prohibition of gambling (Maysir and Qiniar); (iii) adherence to all Shariah requirements related to specific relationships, arrangements and transactions; (iv) facilitation of a sustainable economic system, risk and reward sharing, and social justice; (v) avoidance of injustice, exploitation, hoarding, fraud, deception and activities that are deemed harmful to society.

Effective date: 1962-06-07

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