Legal notice to set up Shariah banking division in central bank

A Supreme Court lawyer has issued a legal notice to set up a separate Shariah banking division in the central bank for proper supervision and regulation of Shariah-based banks and non-banking financial institutions.

Lawyer Md Mahmudul Hasan on Tuesday (19 September) sent the notice to the central bank governor and finance secretary to take the necessary steps in this regard.

Mahmudul Hasan told reporters that Bangladesh Bank has to take the necessary steps to establish a separate Shariah banking division and form its own Shariah board within 30 days of receiving the legal notice. Otherwise, a writ will be filed in the High Court in this regard.

The notice reads that Bangladesh Bank, the only central bank of the country, was established in accordance with the Bangladesh Bank Order, 1972. According to Section 7A (F) of this Act, one of the main functions of Bangladesh Bank is to control and supervise all banks and financial institutions, which it has failed to do as it has no Shariah banking division.

Two types of banking systems are prevalent in Bangladesh – interest-based conventional banking and Islamic Shariah-based banking.

There are ten fully-fledged Shariah-based banks in Bangladesh. Besides, 23 Islamic banking branches of 11 conventional commercial banks and 511 Islamic banking wings of 13 conventional commercial banks provide Shariah-based financial services.

Customers and experts have complained that Shariah-based banks and financial institutions in Bangladesh are not properly following Shariah. They are mainly trading on the religious sentiments of the Muslim population as the central bank has failed to properly supervise and control them.

Besides, the central bank does not have any Shariah board to verify the products of Shariah-based institutions and is unable to play any role in controlling and supervising them, which is a failure to fulfil its legal obligations.