Shariah supervisory committees to oversee Islamic banking, report non-compliance: BB
The directives were issued today (28 September) by the Islamic Banking Regulation and Policy Department of Bangladesh Bank, covering the formation, appointment, removal, and duties of the committee members.
The central bank has made the formation of Shariah supervisory committees mandatory for all Islamic banking institutions and has issued detailed guidelines on members' qualifications and responsibilities.
According to the new guidelines, if any Shariah non-compliance is detected in a bank's operations, the bank's board must take immediate corrective and preventive measures based on the supervisory committees' recommendations, and in cases of negligence of board, the committee will report to the central bank.
The directives were issued today (28 September) by the Islamic Banking Regulation and Policy Department of Bangladesh Bank, covering the formation, appointment, removal, and duties of the committee members. The new rules will take effect from 1 January 2026.
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It adds that the committee's decisions on Shariah matters will be considered final, and the bank's board and management will be obliged to implement them.
In cases of disagreement over Shariah matters between the supervisory committees and the bank's management, executive or audit committees, or the board, the committee must notify Bangladesh Bank.
The circular further states that Bangladesh Bank had first issued directives on committee formation in 2009, but there were no clear instructions on the number of members, honoraria, tenure, or duties. The new guidelines provide detailed instructions in these areas.
Under the new directives, each bank's board must form an independent supervisory committees comprising qualified, competent, and neutral experts in Islamic jurisprudence.
Qualifications for supervisory committee members
Candidates must hold a bachelor's degree in Kamil, Dawra-e-Hadith, Islamic Studies, Islamic Economics, Islamic Finance, Islamic Banking, or Islamic Law from a recognised university. Third-class degrees at any stage are not acceptable. Higher qualifications, such as a PhD, will be considered an added advantage.
Candidates must also have at least two years of teaching experience, work experience as a Mufti, or prior involvement in a bank's Shariah committee. Publications or research in Islamic banking or economics will also be considered.
SSC members must declare in writing that they have never been convicted of criminal or financial offences, are not loan defaulters, and hold no executive positions in any bank or financial institution.
They must not have any direct or indirect business relationships that could create conflicts of interest.
Composition, tenure, and remuneration
Each committee will have three to five members, and an individual can serve on a maximum of three supervisory committees. Members are appointed for three years, renewable up to six years, followed by a mandatory two-year gap.
Members will receive a monthly honorarium of BDT 25,000 and BDT 8,000 per meeting. The board may remove a member for valid reasons with Bangladesh Bank's approval, while members may resign with written notice.
One member will be elected chairman for three years, while the head of the Shariah Secretariat will act as secretary without voting rights.
Shariah secretariat
All banks must establish a Shariah Secretariat to support the supervisory committee. It will include departments for internal Shariah audit and review, Shariah compliance, and research.
The Secretariat will assist with meeting agendas, record-keeping, and issuing Shariah opinions.
Duties and responsibilities
The committee will ensure that all bank policies, manuals, contracts, products, services, and promotions comply with Shariah. It will oversee profit-loss and investment accounting, Zakat calculations and distribution, and the use of Qard funds.
New products require a Shariah ruling before launch, and any non-compliant products require prior approval from the Bangladesh Bank.
The Secretariat will prepare an annual audit plan, approved by the supervisory committee. Any objections will be reviewed quarterly, and serious irregularities will be reported to the board. Members must attend at least 75% of meetings, with three consecutive absences resulting in automatic removal.
The committee members are strictly prohibited from disclosing any information or documents obtained during their tenure. This confidentiality requirement will be included in their appointment contracts.
