Raising loans on interest prohibited, SECP issues draft amendment to Shariah regulations

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Thursday issued draft amendments to Shariah Governance Regulations, 2018 saying that raising loans on interest is prohibited.

In regulation 11, the SECP proposed following amendments:

“(ii) the collective amount raised as loan on interest whether long-term or short-term debt does not exceed thirty percent of the market capitalization or total assets of the company, knowingly that raising loans on interest is prohibited whatsoever the amount is;

“(iii) the total amount of interest-bearing deposits and Shariah non-compliant investments, whether short-, medium- or long-term, shall not exceed thirty percent of the market capitalization of total equity or total assets of company knowingly that interest taking deposits and investments are prohibited whatsoever the collective amount is”;

The SECP further proposed amendment:

“Provided that the prevailing Shariah screening criteria of the Exchange for all shares Islamic index may be used only for the companies on the all shares Islamic index, and shall be replaced with the above criteria by 30th June 2020.”

For disposal of Shariah non-compliant investments, the SECP proposed:

“Shariah compliant companies shall divest the Shariah non-compliant investments above thirty per cent threshold within a period of one year or when the market value of the investment equals the cost of investment, whichever is earlier:

“Provided that the Commission may, for reasons to be recorded in writing and subject to such conditions or restriction as it may deem fit to impose on recommendation of the Shariah Advisory Board, relax any of the requirements of this regulation in case of any difficulty arises in giving effect to any of the requirements of this regulation in a particular case, or class of cases.”

In regulation 3, it is proposed:

“Provided that the companies on PSX All Shares Islamic index shall be deemed to be Shariah compliant till December 31, 2019:

“Provided further that for purpose of availing tax rebate, the Shariah compliant companies referred in the first proviso shall meet the criteria as prescribed in Income Tax Ordinance, 2001.”

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