BUSINESS PROCESS DOCUMENTS, INVESTMENT CHAPTER, ANNEXURE: ISLAMIC MODES OF

FINANCING;

INVESTMENT MODULE

(Bai-Murabaha)

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INDEX
SL NO. Contents Page No.
01 Definition & Feature 03
02 Investment Life Cycle 05
03 Process Work Flow 07
04 Approval process 09
05 Approval Advice 09
06 Documentation 09
07 Preparation Check List 10
08 Disbursement Authorization 10
09 Disbursement Process 11
10 Follow up & Supervision 11
11 Recovery & Adjustment 11
12 Classification & Provision 12
13 Rescheduling 15
14 Legal Action 17
15 Write Off 19
16 Accounting Procedure 20

01.00. Definition & Feature :

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01.01 : Definition : It is a mode of Investment wherein buyer and seller

engage themselves in a contract of buying and selling of Shariah
permissible goods at a price where cost price is disclosed and is payable
in cash payment or in future determinable date in lump sum or fixed
installment taking delivery of the goods at the time of contract.

01.02. : Features :
A. Shariah permissible goods are to be purchased from third party by
the bank
B. The subject of sale must exist at time of sale.
C. The goods should be in the ownership of the seller at the time of
sale.
D. The sale must be unconditional.
E. An offer of customer to buy a specified goods by the bank and
commitment of the said customer to buy the same goods i.e.
confirmation of buying and selling at a price cost plus agreed upon
profit
F. Price verification by bank officials
G. Bank may engage buying agent on his behalf to procure goods.
H. Goods must be purchased as per specification of customer
I. Bank official must verify the condition of goods physically after
purchasing of goods by the buying agent.
J. After purchasing of goods the bank must bear the risk of goods until
those are actually sold and deliver to customer.
K. Ownership of goods by the bank must be established for at least
one moment of time.
L. It is a investment sale mechanism in which possession and
ownership of goods is transferred at the time of contract and
payment will be made on deferred basis by installment or at a time
M. Profit markup to be made
N. Bank is not bound to declare cost and markup profit separately
O. Commission, transportation, TA/DA to be borne by the bank in case
of purchasing the same by the bank and to be loaded with cost price
to setup profit
P. Price once fixed cannot be changed
Q. The profit can be lump sum or in percentage of the cost/ purchase
price. But under no circumstances the percentage of the profit shall
have any relation with time or expressed in relation with time, such
as per month, per annum etc.

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R. Cash/collateral security may be taken to indemnify loss or damage

prior to signing the agreement or at the time of signing agreement
S. Rebate will be applicable in case of early or prepayment which to be
calculated automatically.
T. Compensation will be charged if repayment is made after the expiry.

01.03. Special Feature :

a) Repayment can be done in lumpsum basis
or fixed installment basis.
b) These Investments are usually allowed for
one year. But it can be allowed for below one year and
more than 01 year. Profit markup to be made
accordingly.
c) In case of investment for more than 01
year, repayment will be fixed installment basis.
d) Disbursement takes in deal basis
e) No further disbursement is allowed after
the full amount disbursement.
f) Investment is repayable in a single or
multiple repayment but full adjustment within the
validity.
g) Have a fixed maturity
h) Have a Predetermined profit .
01.04 : Types :
 Murabaha (Commercial)
 Murabaha (Industrial)
 Murabaha (Import Bill)
 Murabaha Post Import (Hypo)
 Murabaha Post Import (pledge)
 Murabaha (Packing Credit)
 Murabaha (WES Bill)
 Murabaha (Pre shipment)
 Murabaha (Bills of Exchange)
 Murabaha (Schemes)
 Murabaha (SME)

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02.00. Investment Life Cycle :

1. The investment-client starts repayment in regular manner for the
disbursed amount. In parallel, The Branch Investment Officer
starts monitoring. If any deviation founds in compliance of terms
and condition and Investment financial health he prepares an
early alert and send it to Investment Administration Division, HO.
2. If the customer repays the Investment regularly the account is
adjusted at maturity.
3. If the customer repays the Investment before maturity or Partial
amount before maturity but full payment on maturity, they will
get Rebate.
4. If the customer fails to adjust on maturity, it becomes overdue
and profit will be stopped and the same amount will be charged
as Compensation realizable account for the overdue period
up 89 days . But for the over period 90 days to 180 days (06
months overdue) Profit will charged as Compensation
Suspense Account will be charged.
5. If the customer fails to adjust on maturity, it becomes overdue
and Penalty profit as Compensation Realizable Account will
be charged @ 1.00% p.a. for 1 st month overdue, @ 1.50% p.a. for
2nd month overdue & 2.00% p.a. for 3 rd months overdue and so
on.
6. If the customer fails to adjust on maturity, but handsome amount
adjust within the maturity, he will get Rebate for the portion of
prepayment. In Parallel, profit will be stopped for overdue
amount and the same amount will be charged as Compensation
realizable account for the overdue period up 89 days . But for
the overdue period 90 days to classified as DF, Profit as
Compensation Suspense Account will be charged.
7. If Investment account becomes classified, classification status
changes as per Central Bank parameter of classification. And the
Provisions are kept according to Central Bank policy from HO.
8. The classified Investment information must be reported to the
Central Bank at the month end and quarter end by submitting
the CL, CIB and SBS3 report
9. Whenever the Investment account is marked BAD/LOSS, the
Profit calculation continues and will be kept in a separate
register identifying client as well as account wise but the Profit
application to Investment account stops. (Calculator)
10. If the Classified Investment account seems recoverable, then
as per Head office approval Investment account proceeds to
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rescheduling. If the Investment account is rescheduled it gets a

newer life. The rescheduled Investment information must be kept
in the system for Central bank reporting.
11. During the rescheduling the Compensation Realizable
Account & Compensation Suspense Account balance for that
Investment account must be recovered first and transferred to
Head Office as Compensation Realized Account. Sometimes it
may hold some balance in those account after the rescheduling
and declassification of the Investment account if the recovered
amount is less than the Compensation Realizable Account &
Compensation Suspense Account balance for that
Investment.
12. If the Classified Investment account seems unrecoverable,
then the HO recovery unit proceeds to Lawsuit filing. After
lawsuit filing the system stops Profit calculation. And capitalize all
unapplied Profit to the Investment account while marking
Lawsuit. And System just holds the account status open until the
Court gives any resolutions.
13. As per court order, recovery unit of Head office liquidates the
collaterals of the customer and adjusts the Investment.
Meanwhile, if the Investment is not rescheduled, the Recovery Unit writes
off the Investment and transfers the Investment to a separate Written-off
Investment Register. Though it is washed out from the balance sheet of
the Bank, the recovery process continues.

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03.00. Process Work Flow :

1. Prospective customer collects application form from the respective
Branch and submits the Investment application to the relationship
officer/Branch Investment officer.
2. The relationship officer/ Branch Investment officer scrutinizes the
application form, collects necessary information, if any required and
assess the investment worthiness of the investment-client. If the
proposal is not worth/ bankable he returns a refusal letter to the
customer immediately. If it is acceptable he forwards the same to
Branch investment committee.
3. If the Branch Investment committee founds viable then they will
approve the Investment and forward the application to the
Investment Division, Head office, otherwise they will reject the
proposal.
4. Head office Investment Official will scrutinize the application,
analyze and prepare a memo with due diligence along with their
observations/ results of analysis and to place it to the HO
Investment Committee. “One Obligor Report” to be submitted for
the customer if the customer has other liabilities with the Bank.
5. After full satisfaction, the proposal will be approved by the existing
delegated authority of head office (Head of investment Committee-
> Managing Director-> Executive Committee-> Board). If not, then
the proposal will be declined. If the Proposal is approved, the
sanction letter of the Investment is sent to branch along with
required terms and Documentation list. And Investment
administration division will setup an approval limit for the customer
of sanctioned/approved Investments.
6. After getting the approval, branch offers the Investment to the
customer. And collects the customer’s acceptance along with
required security documents. Branch then informs the head office
with a list of document those have been received from the customer
and puts the documents in safe custody and records the entry in
Safe in/ Safe out register.
7. Branch then initiate the Investment commitment and request for
disbursement authority from Head office Investment Administration
Division.
8. Head Office Investment Administration Division sets up the
Disbursement Limit and render authority to the Branch.
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Getting the disbursement authority, Branch creates the Investment

Account/Deal for the Investment against the Investment limit and
disburses the amount to Customer by crediting Pay order or Service
account and debiting the Investment Account.

Work Flow Diagram

EC’s approval /rejection MD’s discretion. He
after proper scrutiny approves/declines
HO

Yes No

Letters issued by branch either for

Sanction Advice review or decline the proposal
Branch

Documentation process

Disbursement Authorization
HO No
Yes

Fully complied Deferral If not complied with the

terms & conditions sanction terms, refer to
branch for fulfillment of
lapses

Disbursement

Follow-up and
Branch
Supervision

Recovery & Adjustment

Classification & Provisioning Suit file Write off

Reschedule

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04.00. Approval process

 The investment proposal is forwarded to HO
 HO investment committee analyze the proposal
 If positive, sanction advice send to Branch
 If negative, declined message send to branch

05.00 :Approval advice

 Branch receives approval letter
 Certain terms and conditions
 Branch advices the Sanction letter to customer

06.00 :Documentation
 Fulfillment of terms and conditions by the
customer
o Acceptance of sanction advice by the
customer
o Personal guarantee(if any)
o Charge documents
 DP note(single and joint)
 Letter of hypothecation
 Letter of disbursement
 Letter of continuity
 Letter of arrangement
 Letter of disclaimer
 Balance confirmation
 DP note delivery letter
 DP note revival letter
 Purchase schedule
 Bai Murabaha agreement
 Buying agent agreement

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o Security document (If Investment is backed

by collateral security)
 Following original documents to be
vetted for genuineness by the enlisted legal
advisor
 RM with RIPA supported by letter of
satisfaction by enlisted lawyer.
o CIB and CRG report

07.00 : Preparation of Checklist

 Preparation of Checklist for disbursement
permission from Head Office
o Acceptance
o Charge documents
o Security documents
o Shariah permissible goods
o CIB report
o CRG
o Certificate from Department of Environment
o Certificate from Department of Fire Service
& Civil Defense
o Certificate from Department for Inspection of
Factories
o Others

08.00 : Disbursement authorization

 Branch seek disbursement authorization from
Head Office complying terms and conditions
 Head office verifies the checklist with sanctioned
terms and condition
 If comply with terms & condition then give
permission for disbursement

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09.00: Disbursement Process

 Branch receive the disbursement permission from
Head Office
 Branch receive request for purchasing goods from
customer
 Branch purchase specified goods directly or
through buying agent by creating Bai Murabaha Account.
 Payment will be made by PO/DD/AWCD/Link A/C
 Release of markup profit
 After signing Bai Murabaha agreement by the
customer, branch handover goods to customer
 Others

10.00 : Follow-up and Supervision

 Periodical visit by investment officer/In charge
 Reminder sent to customer before expiry of deal
(MIS)
 Others

11.00 : Recovery and adjustment

 Partial adjustment is allowed
 If full adjustment before expiry, rebate will be
given to customer
 If partial adjustment before expiry and final
adjustment on expiry, rebate will be given to customer
 If partial adjustment before expiry but final
adjustment after expiry rebate will be given proportionately
which to be calculated automatically.

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 If unadjusted within expiry, compensation will be

charged from the day after expiry till adjustment

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12.00: Classification & Provisioning

Basis of Investment Classification:
A) Objective
Past Due / Overdue
Categories Day of Past Due/ Amount of
Overdue start Past
Due/Overdue
Continuous Following the day of expiry Balance
Investment date, if unpaid Amount

Standard: All Unclassified Investment other than SMA

Special Mention Account (SMA): A Continuous Investment which
will remain overdue for a period of 90
days or more.
Sub-standard, Doubtful and Bad/Loss-Continuous
Classification Criteria
Sub-standard(SS) Past Due/ Overdue for 6 months or
above but not over 9 months
Doubtful(DF) Past Due/ Overdue for 9 months or
above but not over 12 months
Bad/Loss(BL) Past Due/ Overdue for 12 months or
above

B) Qualitative Criteria : As per Bangladesh Bank Circular

Investment shall be classified on the basis of qualitative judgment if
the following situations arise: -
1. Any uncertainty or doubt involved in the recovery process.
2. Any situational changes occurs due to adverse condition of
investment-client’s capital
3. Any change in the stipulated terms and conditions of the
Investment facility agreement
4. If the value of the security decreases
5. If any Investment is illogically or repeatedly rescheduled or
norms of rescheduling are violated
6. Frequently exceeding the Investment limit are noticed
7. Legal action is lodged for recovery of the Investment

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8. If the Investment is extended without the approval of the proper

authority
Despite the probability of any Investment's being affected due to the
reasons stated above or for any other reasons, if there exists any hope for
change of the existing condition by resorting to proper steps, the
Investment, on the basis of qualitative judgment, will be classified as '
Sub-standard '. But even if after resorting to proper steps, there exists no
certainty of total recovery of the Investment, it will be classified as '
Doubtful ' and even after exerting the all-out effort, there exists no chance
of recovery, it will be classified as ' Bad-Debt ' on the basis of qualitative
judgment.

Accounting of Profit of classified Investment:

 Any investment classified as SMA, Sub-standard or Doubtful,
profit accrued on such investment account will be credited to
profit/compensation suspense account instead of crediting the
same to income account.
 Any investment classified as ‘Bad/Loss’, charging of profit in
the same account will be ceased. But to be calculated in a
separate sheet so that the uncharged profit/compensation can
be obtained at any time or at the time of filing a law- suit.
Maintenance of Provision:
A) General Provision
Types Percentage of
provision
All unclassified investment (other than Small @ 1 %
Enterprise, Consumer Financing and Special
Mention Account)
Unclassified investment for Small Enterprise @ 2 %
Financing
Unclassified investment for Consumer
Financing @2%
-Housing Finance @2%
-Loans for Professional to set up @ 5 %
business
-Other than above two
Special Mention Account* @5%
Off-balance Sheet Exposure @1%

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*Profit on suspense to be deducted from investment amount

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B) (i)Provision on Classified Continuous Investment:

Types Percentage of
provision
Sub- Standard @ 20 %
Doubtful @ 50 %
Bad /Loss @ 100 %
Based for provision: Provision will be maintained at the above rate on
the balance to be ascertained by deducting the amount of Profit Suspense
and value of Eligible Securities from the outstanding
balance of classified accounts.
Eligible Securities: In the definition of Eligible Securities as mentioned
in the above paragraph the following securities will be included as eligible
securities in determining base for provision.
-100% of deposit under lien against the loan
-100% of the value of government bond/savings certificate under
lien
-100% of the value of guarantee given by Government or
Bangladesh Bank
-100% of the market value of Gold or Gold ornaments pledged with
the Bank
-50% of the market value of easily marketable commodities kept
under control of the bank.
-Maximum 50% of the market value of land and building mortgaged
with the bank
-50% of the average market value for last 06 months or 50% of the
face value, whichever is less, of the shares traded in stock
exchange.
Maintain Account wise Suspense Register
System should maintain the account wise Investment suspense register.
For Classification account, the system will maintain two type of Suspense
account one for SMA Suspense and another CL suspense.
For any classified Investment account, the suspense register should show
the amount of suspense amount. In case of any status change, system will
auto reverse the suspense amount to income.

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13.00 : Rescheduling :
After Opening a Investment Account/Deal, it can be rescheduled as per
management decision in its lifetime. Investment/Deal account may be
rescheduled for the N number of times. Reschedule can be done against
lump-sum payment basis or fixed installment basis for than 01 Years.
When a classified account is rescheduled then the classification status will be changed in to
unclassified (Standard) account. In case of rescheduling down payment should be as follows:
i) Continuous 1st Time Up to 1.00 Crore 15.00%
& Demand TK. 1.00 Crore to 10% but minimum TK. 15.00
5.00 Crore Lac.
TK. 5.00 Crore & 5% but minimum TK. 50.00
Above Lac.
2nd time 30% of overdue or 20% of outstanding, which ever
is lower
3rd time 50% of overdue or 30% of outstanding, which ever
is lower
ii) Continuous 1st time 20% of outstanding
to Term 2nd time 30% of overdue or 20% of outstanding, which ever
Investment is lower
3rd time 50% of overdue or 30% of outstanding, which ever
is lower

After Rescheduling, the Investment Account will be marked as follows:

No. Of Type of reschedule Code (For CIB-4)
cases
Case 1 Rescheduling Only:
1st time Rescheduling RS1
2 time Rescheduling
nd
RS2
And so on …
Case 2 Rescheduling with Profit
(Compensation) Waiver: RS1W1
1 st
time Rescheduling with Profit RS1W2
waiver ….
2 nd
time Rescheduling with Profit
waiver
And so on

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Case 3 Rescheduling with Previously

rescheduled with Profit waiver
2nd time Rescheduling with Profit RS2W
waiver RS3W
3rd time Rescheduling with Profit ….
waiver
And so on
Case 4 Rescheduling with Principal Waiver RSPW

Restrictions after reschedule :

After reschedule (if any) the customer will get new facility subject to
fulfillment of following conditions
a) The defaulting borrower who has availed interest waiver must settle
at least 15% of the compromise amount (excluding the down
payment on rescheduling as per present guidelines) to avail any
further credit facility from any Bank.
b) In case of borrowing from other Banks, the same rule will be
applicable, i.e. the borrower will have to settle at least 15% of
compromise amount (excluding the down payment on rescheduling
as per present guidelines), then, will be allowed to take regular
facility from other Banks subject to the submission of NOC (No
Objection Certificate) from the rescheduling bank.
c) If there is any Principal waiver, no fresh facility will be allowed till
the full settlement of compromise amount
d) Export borrowers may be granted further credit facility (after being
identified as not a willful defaulter), if required, subject to settle at
least 7.5% of the compromise amount (excluding the down payment
on rescheduling as per present guidelines) being paid.
e) Prior approval of Bangladesh Bank shall have to be obtained if the
loan is related to the director/ ex-directors of a Bank Company.

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14.00 : Legal Action

1. Review the classified Investments and generate report as required by
the user.
2. Issue Reminder letter to defaulting customer by the branch.
3. Issue Call back notice of the Investment by the Branch.
4. Issue final notice to the customer by the branch.
5. Capture legal opinion of Law Officer/ Legal Adviser, regarding legal
action to be taken against the borrower.
6. Capture Legal notice served to the borrower by Law Officer/ Legal
Advisor.
7. Capture particulars of suits filed by the Bank ( link with law suit)
8. Capture profit automatically which were not charged in client’s
investment account before going to legal action
When to Place Law suit
The bank has to opt for filing suit against the customer if sufficient
repayment is not made during different stages of Investment tenure.
System should calculate the “% of recovery against due for recovery”. The
formula for such calculation is as follows:
% of recovery against due for recovery = (Amount recovered /
Amount due for recovery) * 100
According to Artha Rin Adalat Ain-2003 section 46, the requirement
for the law suit filing are given below:
A financial Institutions shall file a suit after expiry of next one year, if an
investment-client fails to payback the investment outstanding according
to the terms of agreement after starting payment schedule as follows :
a) At least 10% amount of one years payable loan
b) At least 15% amount over the 02 years payable loan
c) At least 25% amount over the 03 years payable loan
For Investments within 3 years:
Perio % Recovery Date within which Suit Filing should be done

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d against due for

Recovery
1st Less than 10% 360 days from the date when recovery % falls less
year than 10%
2nd Less than 15% 360 days from the date when recovery % falls less
Year than 15%
3rd Less than 25% 360 days from the date when recovery % falls less
Year than 20%

For Investments having maturity for less than three years the suit-filing
requirement is as follows:
Period % Recovery against due Date within which Suit
for Filing should be done
Recovery
Amount due for Less than 20% 360 days from the date
recovery when recovery % falls
At maturity period less than 20%
(Principal+Profit+charg
es)

Monitoring of suits filed

A) System should be able to support monitoring, supervision and follow
up of all court cases filed by the Bank.
B) System should be able to support to
1. Tracking of suit file by the Branch against the Borrower
2. Generate reports on suits pending.
3. Tracking of suit filed and handled by Banks legal advisors
4. Generate report on status of recovery against suit filed (borrower
wise)
C) System should be able to support processing, payment, and
tracking of legal bills paid to the legal advisor. Branch is to submit
proposal to Head Office in prescribed format and Management
approval is to be obtained by placing Memo in the prescribed format

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15.00 : Write Off

Write off notification is required for those classified accounts that have
passed 5 years as BAD/LOSS Account and 100% provision has been
maintained the Investment Accounts. Write off can be done before a
Lawsuit filing process also. In that case, the unapplied accrued Profit must
be applied to Investment account first. Before Write off, the suspense
register must be fully adjusted and accrued Profit need to be applied to
that Investment account.
System should keep the information of write off process. The following
fields required for Write Off:
1) Law Suit filed (Y/N)
2) Law Suit Status Decree (Y/N)
3) Auction for Direct Sale (Y/N)
4) General Auction (Y/N)
5) Collateral sold (Y/N)
6) Proceeds Realized (Y/N)
7) Amount Actual Realized: (Y/N)
8) Out Standing Net of Proceeds Realized : Profit Suspense
9) Out Standing Net of Proceeds Realized: Profit Performa
10) Out Standing Net of Proceeds
11) Realized Principal

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16.00 : Accounting Procedure :

After receiving request from customer for purchasing goods, the
respective officer will pass on following vouchers after verifying all
requirements:
Dr/Cr Account Name Amoun
t
Debit Investment A/C X Taka
Credit PO/DD/Link A/C/AWCD X Taka
For Profit Markup
Debit Investment A/C X Taka
Credit Mark up profit Receivable A/C X Taka
For storage, insurance, maintenance, etc.) (If required)
Debit Investment A/C X Taka
Credit Pay order/Beneficiary’s A/C X Taka
For Charges And Documentation Fee
Debit Customer’s SB/CD a/c. (only customer C1 Taka
a/c)
Credit Documentation fee received (GL C1 Taka
Account)
Valuation Fee (If required)
Debit Customer’s SB/CD a/c. (only customer C2 Taka
a/c)
Credit Valuation fee received (GL account) C2 Taka
Legal Fee

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Debit Customer’s SB/CD a/c. (only customer C3 Taka

a/c)
Credit Legal fee received (GL account) C3 Taka
Commission
Debit Customer’s SB/CD a/c. (only customer C4 Taka
a/c)
Credit Cr. Commission realized (GL account) C4 Taka
Service Charge
Debit Customer’s SB/CD a/c. (only customer C5 Taka
a/c)
Credit Service charges realized (GL account) C5 Taka
Stamp Duty
Debit Customer’s SB/CD a/c. (only customer C5 Taka
a/c)
Credit Cr. Stamp Duty realized (GL account) C5 Taka

End of Each Month :

After end of each calendar month profit portion of the respective month to be transferred to
income account on daily product basis from markup payable account:
Dr/Cr Account Name Amou
nt
Debit Mark Up Profit Receivable
A/C
Credit Income Account

After receiving part payment the outstanding balance changes. And Profit calculates on
outstanding balance.
Dr/ Account Name Amou
Cr nt
Debit Cash/Savings/ Pm
Current Taka
Credi Investment A/C Pm
t Taka

After Repayment of part payment Outstanding balance O=O- Pm

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A) Closing before Expiry: In case of full adjustment before expiry rebate will be
given to customer. Profit transfer to income account from markup profit receivable account
for fraction number of days of the month. Remaining balance of Markup profit payable
account to be transferred to respective investment account as rebate.
Dr/ Account Name Amoun
Cr t
For Charging Accrued Profit
Debit Mark up profit Receivable A/C IsTaka
Credi Income on Investment A/C IsTaka
t
For Rebate Apply
Debit Mark up profit Receivable A/C Ir Taka
Credi Investment A/C Ir Taka
t
For Adjustment
Debit Link A/C/AWCD/Cash O taka
Credi Investment A/C O taka
t
Credit Investment Income A/C (Early Adjustment Fee) CT
Let Accrued profit is, IsTaka , Rebate Profit is Ir Taka &
Investment Outstanding O = O- Pm - Ir
A) Closing on Expiry: In case of full and final adjustment on the expiry date
following entries will be passed on.
Dr/ Account Name Amou
Cr nt
For Charging Accrued Profit
Debit Mark up profit Receivable IsTaka
A/C
Credi Income on Investment A/C IsTaka
t
For Adjustment
Debit Link A/C/AWCD/Cash O taka
Credi Investment A/C O taka
t

B) After Expiry (after expiry but before SMA): Balance amount of

Markup profit Receivable account (if any) to be transferred to income
account on expiry after COB. Compensation to be charged in

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 BUSINESS PROCESS DOCUMENTS, INVESTMENT CHAPTER, ANNEXURE: ISLAMIC MODES OF
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investment account at the same rate on principal outstanding as

Compensation realizable account. **Additional Penalty profit as
Compensation Realizable Account will be charged @ 1.00% p.a. for
1st month overdue, @ 1.50% p.a. for 2 nd month overdue & 2.00% p.a.
for 3rd months overdue and so on.
Dr/ Account Name Amou
Cr nt
For Charging Balance profit of Mark Up
Profit
Debit Mark up profit Receivable IsTaka
A/C
Credi Income on Investment A/C IsTaka
t
For Charging Overdue Profit
(Compensation)
Debit Investment A/C
Credi Compensation realizable
t account
For Charging Penalty Profit
(Compensation)
Debit Investment A/C
Credi Compensation realizable
t account
C) After Expiry (after SMA to DF classification): Compensation to be
charged in investment account at the same rate on principal
outstanding as Compensation Suspense Account. **Additional
Penalty profit as Compensation Suspense Account will be charged
@ 2.00% p.a. for 4th months overdue and onward.
Dr/ Account Name Amou
Cr nt
For Charging Overdue Profit
(Compensation)
Debit Investment A/C
Credi Compensation Suspense
t account
For Charging Penalty Profit
(Compensation)
Debit Investment A/C
Credi Compensation Suspense

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t account
D) After Expiry (after DF to BL/Lawsuit) : Compensation to be
calculated at the same rate on principal outstanding & additional
Penalty profit will be calculated @ 2.00% p.a. for onward period , but
those will not be charged.
E) Closing after expiry (Full at a time): At the time of adjustment sales price,
compensation amount and additional fees (if any) to be realized from the customer.
Dr/ Account Name Amou
Cr nt
For Charging Overdue Profit (Compensation)
Debit Investment A/C
Credi Compensation Suspense account
t
For Charging Penalty Profit (Compensation)
Debit Investment A/C
Credi Compensation Suspense (penalty)
t account
For Adjustment
Debit Link A/C/AWCD/Cash
Credi Bai-Murabaha Investment A/C
t
For transferring Compensation to HO
Debit Compensation realizable A/C
Debit Compensation suspense A/C
Credi Compensation realized A/C
t

Rescheduling by waiving Profit :

Any Investment’s Profit can be waived by the management decision. Profit
waiver can be done for the below profit type:
01. By Waiving uncharged Compensation Suspense A/C (in case of BL)
02. By waiving Charged Compensation Suspense A/C (SMA to
Doubtful)
03. By waiving Charged Compensation Realizable A/C (Overdue)
04. By waiving Charged profit

01. By Waiving uncharged Compensation Suspense A/C :

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 BUSINESS PROCESS DOCUMENTS, INVESTMENT CHAPTER, ANNEXURE: ISLAMIC MODES OF
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Dr/ Account Name Amount

Cr
For Charging Overdue Profit (Compensation)
Debit Investment A/C OPC
Credi Compensation Suspense account OPC
t
For Charging Penalty Profit (Compensation)
Debit Investment A/C PPC
Credi Compensation Suspense (Penalty) PPC
t account
Waiver Profit
Debit Compensation Suspense A/C OPC +
PPC
Credi Investment A/C OPC +
t PPC
OPC stands for Overdue Profit (Compensation) & PPC stands for Penalty
Profit (Compensation)
02. By waiving Charged Compensation Suspense A/C
Waiver Profit
Debit Compensation Suspense OPC +
A/C PPC
Credi Investment A/C OPC +
t PPC

03. By waiving Charged Compensation Realizable A/C

Waiver Profit
Debit Compensation Realizable OPC +
A/C PPC
Credi Investment A/C OPC +
t PPC

04. By waiving Charged profit

Waiver Profit
Debit Income from Investment A/C
Credi Profit Receivable from Investment
t A/C

Write Off Process Accounting:

To adjust the suspense register balance for that account, the following transactions are done:

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 BUSINESS PROCESS DOCUMENTS, INVESTMENT CHAPTER, ANNEXURE: ISLAMIC MODES OF
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Dr/Cr Account Name Amou

nt
Debit Profit Suspense A/C
Credit Investment Income A/c

The Write Off process will do the following transactions:

If the total outstanding for a BAD/LOSS account is Om taka
Dr/Cr Account Name Amou
nt
Debit HO General A/C
Credit Classified Investment A/c

Notes:
 Murabaha/Muajjal A/c.: List of Goods, Challan No., Date, Supplier, Amount, to be
incorporated for each deal disbursement or appointment of buying agent- with date.
 Some disbursement against which no profit to be charged, such as Insurance Bill paid
by Bank which was supposed to be paid by the client.
 For any disbursement account may have field for both Principal + Profit [PAD to TR
and so on]
 In case of PAD (Murabaha Import Bill) to TR, Profit to be realized first or profit to be
entered separately in the disbursement account. (Bank will lose time value of money)/
When a client enters an agreement for retirement of documents from own source but
fails to do so, MPI facility is required to avail and in that case profit to be calculated
under single deal starting from lodgment to adjustment of MPI facility and that to be
calculated in between of the investment tenor.
 MPI : Principal= LC Value + duty + Tax + VAT+ Others
 A bai-murabaha agreement as single deal should be signed for the period from date of
lodgment (PAD) to final release of documents (adjustment of TR) against which
profit to be charged under single deal. Different 02 mode of investment cannot be
disbursed against single goods.
 For taking over liability against CC Hypo of other Bank: Only investment on
principal amount, disbursement from Quard a/c against which service charge may be
applied, No disbursement from Baim since no physical existence of goods.
 Converting MPI to HPSM: Only for Non-fungible/Retainable goods, previously made
MPI agreement to be seized and fresh HPSM agreement to be made. Profit of MPI to

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be segregated from principal which may be realized immediately or from the

installments at early stage.
 Parameter of an investment account:
1. Multiple rate can be applied in the same investment account,
2. Account may be acting as per logic given.
3. Automatic fund transfer can be done from or to other a/c.
4. User defined input default.
5. For a new account, some common input can be seen in the screen when a the
new a/c is opened.
6. Any a/c can be auto renewable with option of profit rate change.
7. All rate changes should be kept recorded historically.

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Murabaha (Commercial)

Extended against trading business. All the policy & procedures are as per
Bai-Muajjal Commercial policy.

Murabaha (Industrial)
Extended against Production business. All the policy & procedures are
as per Bai-Muajjal Commercial policy.

Murabaha (Import Bill)

Extended against import business (PAD). All the policy & procedures are
as per Mark-up policy

Murabaha Post Import (Hypo)

Extended against imported merchandise where the position of goods to
be kept with the client. All the policy & procedures are as per Bai-Muajjal
Commercial TR policy

Murabaha Post Import (Pledge)

Extended against imported merchandise where the position of goods to

be kept with the
Bank. The goods to be released in proportionate with the client’s
payment. All the policy & procedures are as per Bai-Muajjal
Commercial TR policy

Murabaha (Packing Credit)

Extended against lien Export L/C. All the policy & procedures are as per Mark-
up policy.

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Murabaha (WES Bill)

Extended for the payment against those matured Back To Back L/C of which the goods
have not yet been shifted on board. All the policy & procedures are as per
Mark-up policy.

Murabaha (Pre shipment)

Extended for purchasing goods that are to be exported at price which
is less than the Export L/C. All the policy & procedures are as per Mark-
up policy.

Murabaha (Bills of Exchange)

Extended against the documents of shipment arises from export of
goods (IDBP/FDBP). It is similar to the Bill of exchange. It can only be
extended against the currency of documents which is not same of
investment currency. All the policy & procedures are as per Mark-up
policy
However, incase of same currency, Quard facility can be extended.

Murabaha (Schemes)
Extended against different schemes which are floated/ to be floated for as
and when the introduce the policy.

Murabaha (SME)
Same as Bai-Muajjal (SME) facility.

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