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or the ur ose o! lending or investment" o! de osits o! money !rom the u#lic" re aya#le on demand or otherwise and withdrawa#le #y che$ue" dra!t" order or otherwise" and includes any ost o!!ice savings #ank. Banking & Financial system' Banks are the most im ortant institutions o! a !inancial system" indis ensa#le vehicle o! economic develo ment. What are the !unctions o! commercial #anks? )rimary !unctions' acce ting de osits *e osit )roducts' a+ Current Account #+ Savings Account c+ ,erm - Fi.ed de osit
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#+ 2.ecution o! standing orders. c+ )urchasing & selling o! Securities d+ Acting as corres ondents" re resentative o! Customers & other Banks. e+ Acting as administrator" ,rustee e.ecutor. !+ Cor orate Counseling. (.0%. % 3eneral utility Services' a+ Issue o! letter o! credit. #+ Issue o! ,1A42/21S che$ues. c+ Sa!e custody d+ /ockers. e+ 1e!erees as to 12S)2C,ABI/I,5 o! clients. !+ Issue credit - de#it cards. g+ )roviding market intelligence re ort.
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1i#a in Cadith' From Da#ir <1+' ,he )ro het <Sm+" may cursed the receiver and the ayer o! interest" the one who records it and the two witnesses to the transaction and said' 8,hey are all alike Ein guiltF. 8<=uslim"kita# al =usa$at Ba# laGni akili ar ri#a wa muGkilihiHalso in ,irmidhi and =usnad Ahmed+
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Islamic Financial System Commercial Banking under Islamic Framework 11.01 11.01. 1 Fi.ation o! 1ent under J 1ent SharingG =ode' *iminishing Balance =ethod' In this method the installments are not e$ual. )rinci al installment remains e$ual. 1ent une$ual i.e. calculated on the outstanding rinci al. As at the initial stage rinci al outstanding remain higher so rent is higher which make the installment siIe large. 11.01. % 2$ual Installment =ethod <Annuity =ethod+' In this method the installments are e$ual. )rinci al & 1ent are une$ual 1ent is calculated on the outstanding rinci al and the rest amount o! installment is adLusted against rinci al. At the initial stage rinci al outstanding remain higher so rent is higher and decreased gradually. At the initial stage rinci al adLustment is less and increases gradually.
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Islamic Financial System Commercial Banking under Islamic Framework ,he main di!!erence #etween the *iminishing Balance =ethod and Annuity =ethod is that the )rinci al adLustment is not e$ual. As at the initial stage )rinci al adLustment is less the total 1ent in this method is more than the *iminishing Balance =ethod. 11.01. ( 2$ual Installment =ethod <2$ual 1ent =ethod+' In this method the installments are e$ual. )rinci al & 1ent remain e$ual. 1ent is calculated !or the whole eriod o! Investment considering diminishing #alance o! )rinci al & e$ually distri#uted all over the re ayment eriod. ,hough the total rent on the investment in this case is e$ual to that o! *iminishing Balance =ethod #ut the e!!ective 1.1. is less due to o ortunity loss on the calculated #ut not realiIed rent !or7 the 1st hal! o! the re ayment eriod.
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,here!ore the share o! investment income o! =udara#a *e osit will #e <190P1000QB00+ ,k.1%0.00 /ess a+ %0O =anagement !ee #+ 19O /oss 0!!6setting 1eserve *istri#uta#le Investment Income
Sl. No. 1 1. 2. Type of Yearly Mudaraba Porduct Deposit 2 Mudaraba %a&& 12) Sa'i(gs Mudaraba Ter* Deposit # Mo(ths 1)) 2! Mo(ths 11) 12 Mo(ths ,) )# Mo(ths 12" ) Mo(ths +" Mudaraba 12) Sa'i(gs Mudaraba Short ") Notice Total ,)) Weightage % ! 11) Weightage Product " 1 2.))
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Islamic Financial System Commercial Banking under Islamic Framework 19.00 19.01 *istinguishing Features o! Islamic Banking 1isk Sharing R ;o redetermined rate o! return. R Sharing end result o! the #usiness. R =udara#a loss is entirely #orne #y the shahi#6al6 maaGl. 19.0% 2m hasis on roductivity as com ared to credit worthiness' R *ominant consideration no on collaterals. R 2m hasis on soundness o! the roLect. 19.0( =oral *imension' R Islamic value oriented System. R Full com liance o! Shariah. R ;o !inance !or wine - to#acco - casino - ork roduction or trading.
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Islamic Financial System Commercial Banking under Islamic Framework 19.07 2$uity' R Dustice to all arties. R 1i#a is unLust. 19.09 Allocative e!!iciency' R )roductivity o! the roLect. R Finance goes to high roductive roLect even i! credit worthiness is lower. 19.0> Sta#ility o! the Banking System' R =udara#a & =usharaka =echanism ensure sta#ility.
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