New rules bar bank officials, directors from shariah committees

Banks will have to form independent "shariah supervisory committees" under a new guideline issued by the Bangladesh Bank, which bars directors, executives, and their family members from serving on such bodies.

The guideline, issued yesterday, states that each committee must consist of three to five members, including shariah experts, Islamic scholars, and professionals with experience in economics and banking.

"No member of the board or executive committee or audit committee or officer of the concerned bank, as well as no officer, board, or executive committee member of any other bank, shall in any way be eligible to become a member of the shariah supervisory committee," it states.

The guideline, set to come into effect on January 1, 2026, states that the committee members will not be allowed to have any business interest in the bank, nor ties to any entity owned or controlled by its directors. In addition, no member of their families may be included in the board of directors of the said bank or companies.

At present, many chairmen, directors, managing directors, and other officials hold seats on shariah supervisory committees, often without adequate knowledge of shariah principles.

Under the new rules, no individual can serve on the supervisory committees of more than three banks or financial institutions at once. They will also be disqualified if they have any financial transactions, conflicts of interest, or irregularities.

The task of the shariah committee will be to oversee and approve whether all types of transactions and products of the bank comply with Islamic shariah principles.

For this purpose, the committee will hold regular meetings and keep its decisions recorded, the central bank said.

A member will be entitled to an honorarium of Tk 25,000 per month and a maximum of Tk 8,000 for attending each meeting. The bank's Board of Directors will have the authority to appoint and remove members of this committee.

The Board of Directors must cooperate to ensure the independent functioning of the shariah committee, said the Bangladesh Bank, adding that at the same time, an internal shariah audit department must be formed, which will directly assist the committee.

The Bangladesh Bank's new guideline further stated that the recommendations of the shariah committee must be properly implemented in the bank's policies, operations, and products. If any rules are violated, necessary measures will be taken, it added.