IBRPD Circular No. 01: Formation, appointment and removal of Shariah Supervisory Committee (SSC) members along with their roles and responsibilities for bank-company providing Islamic banking services

1 Bangladesh Bank Chief Executive Office Motijheel, Dhaka-1000 Bangladesh. Ref No.: IBRPD Islamic Banking Regulation and Policy Department

28 September 2025 IBRPD Circular No.-01 Date: ------------------ 13 Ashwin 1432 Managing Directors / Chief Executive Officers All Scheduled Banks operating in Bangladesh.

Dear Sir,

Regarding the policy on the formation, appointment and removal of members of the Shariah Supervisory Committee (SSC) of bank-companies operating Islamic banking programs, along with their roles and responsibilities.

2. We draw your attention to IBRPD Circular No. 15 issued on 09 November 2009 on the subject mentioned above.

3. Section-3 of the aforementioned circular assigns the responsibility of ensuring the Shariah compliance of deposit and investment facilities (DIFs) and other programs of any bank-company to the Board of Directors of the concerned bank. For full-fledged Islamic banks and conventional commercial banks having Islamic banking branches, the directors must have knowledge of Shariah and Islamic banking. The Board of Directors of the concerned bank, possessing adequate knowledge of Shariah, expertise, experience in Islamic jurisprudence, and neutrality, may form a Shariah Supervisory Committee (SSC) consisting of individuals, whose main task is to formulate necessary Shariah policies in the field of Islamic banking program operation, monitor Shariah compliance, etc.

4. Although the aforementioned circular provides instructions regarding the formation of the SSC by bank-companies, detailed instructions regarding the formation, appointment and removal of members, and related matters such as the number of members, honorarium/allowance, term, roles and responsibilities, etc., were not provided. Furthermore, clarification was not given on the number of SSC members, honorarium/allowance, term, roles and responsibilities, etc. Considering the prevailing situation, the following instructions are issued regarding the eligibility and suitability for appointment or reappointment of existing SSC members, formation, number of members, term, honorarium, removal, resignation, election of Chairman and Secretary, formation of Shariah Secretariat, roles and responsibilities, decision-making process in meetings, preparation of minutes, preparation of Shariah-related reports and annual Shariah compliance reports, evaluation of members' performance, and confidentiality of matters related to the bank's stakeholders:

5. Eligibility and suitability for appointment or reappointment of SSC members: At the time of appointing SSC members, the Board of Directors of the concerned bank / Local Management for foreign banks will approve the formation of an independent and neutral SSC comprising Shariah scholars of this country. In this regard, the following suitability and appropriate standards must be considered. The Board of Directors of the concerned bank will be responsible for any error/irregularity in the formation of the SSC. It is desirable that all members of the SSC be practicing Muslims. The following eligibility and suitability must be followed in the appointment of SSC members:

(5.1) Educational Qualification: a. Must hold a Bachelor's or Honors degree in Kamil, Daura-e-Hadith (Takmil), Fiqh, Islamic Studies, Arabic, Islamic Economics, Islamic Finance, Islamic Banking, or Islamic Law from a recognized university/board, along with a Certificate/Diploma/other higher degree or Ifta degree in Fiqh or Usul-ul-Fiqh, especially in Fiqh-ul-Muamalat (Islamic Commercial Jurisprudence); b. There should be no third division or grade in any stage of education. Additionally, a PhD or other higher degree in the above subjects from a nationally/internationally recognized and reputable institution will be considered an additional qualification.

(5.2) Other Eligibility and Experience: In the appointment of SSC members, the candidate must meet at least one of the following standards: a. Must have at least 02 (two) years of practical experience as a teacher or Mufti in the Department of Ifta or Daura-e-Hadith (Takmil), Islamic Studies, Arabic, Islamic Economics, Islamic Finance, Islamic Banking, Islamic Law, or any Shariah department of a reputable university/board; b. Must have at least 02 (two) years of practical experience as a member of the Fatwa Board or Shariah Supervisory Committee of a bank or financial institution; and c. Must have published 02 (two) research papers based on his own study in the above-mentioned fields in a reputable and recognized journal, or must have two authored books or publications on Islamic Finance and Islamic Banking/Economics or Islamic Jurisprudence.

(5.3) Suitability: At the time of appointment as an SSC member, he must declare in writing (Appendix-A) that: a. He has not been convicted by any competent court, nor was he involved in fraud, economic crime, or other irregular activities, nor is he involved in any moral misconduct; b. He has not violated any order, directive, or instruction of the regulatory authority (which is not contrary to Shariah); c. He is not a director of any bank established under the Bank Company Act, 1991, any financial institution established under the Finance Company Act, 2023, any insurance company, or any institution regulated by such companies, nor is he appointed in any profitable position in such institutions; d. He has no commercial interest in the concerned bank, no connection with any institution owned, interested in, or controlled by any director of the concerned bank, and no member of his family is part of the Board of Directors of such banks or companies. Furthermore, members of the Board/Executive Committee/Audit Committee of the concerned bank, or officers of any other bank, cannot be members of the SSC in any way; e. He is not in default of payment of dues to any bank or financial institution, nor is he a personal guarantor, owner, partner in a partnership firm, director, CEO, or head of a company or other corporate body in Bangladesh, and is not in default of tax and loan/investment; f. He has not been prohibited by any religious institution/authority recognized by the government from issuing fatwas on religious laws; g. He will not hold any administrative and/or permanent position in any bank or financial institution while serving as an SSC member; h. SSC members will have no direct or indirect connection or interest in the ownership of the following institutions: (i) The bank where he is appointed as an SSC member, (ii) Institutions related to the concerned bank, (iii) Stock Exchange members, and (iv) Corporate brokerage house members. Furthermore, he cannot be an employee of any of the aforementioned institutions; and i. Each SSC member will immediately inform the SSC Secretary of the concerned bank about any change in his workplace, business status, business, or local address.

6. Formation, appointment, term, honorarium, termination, removal, and resignation of SSC members: a. The power to appoint and remove SSC members will rest with the Board of Directors of the bank. However, the Board of Directors will inform the shareholders at the AGM/EGM. The Board of Directors must follow the prevailing laws and regulations of the country; b. Prior approval must be obtained from the Islamic Banking Regulation and Policy Department (IBRPD) of Bangladesh Bank before appointing SSC members nominated by the Board. For such prior approval, a proposal signed by the Managing Director/Chief Executive Officer of the bank, along with the complete CV of the concerned person(s) and a copy of the Board's approval, must be submitted; c. The number of SSC members will be 03 (three) or 05 (five); however, the SSC may take expert opinions (Subject Matter Experts/SMEs) on business, economics, law, accounting, information technology, etc., as needed; d. A person cannot be a member of more than 03 (three) banks/financial institutions at the same time; e. SSC members are generally appointed for a term of 03 (three) years, and after evaluation of their performance and other qualities at the end of the term, the Board may reappoint one or more members for subsequent terms with the prior approval of Bangladesh Bank. However, if a person serves as an SSC member of a bank-company consecutively for 06 (six) years, he will not be eligible for reappointment to the SSC of such bank-company until 02 (two) years have passed after the expiration of such term. In the case of new appointments, the above instructions must be followed, and if a member is not reappointed, the justification must be recorded in the minutes of the Board of Directors meeting, and the matter must be informed to Bangladesh Bank; f. SSC members will be entitled to an honorarium of 25,000/- (Twenty-five Thousand) Taka per month (subject to applicable tax deduction) and a maximum of 8,000/- (Eight Thousand) Taka (subject to applicable tax deduction) as honorarium for each meeting attendance; g. The Board of Directors, citing specific reasons, may remove the concerned SSC member(s) with the prior approval of Bangladesh Bank; h. SSC members may resign from their membership by providing notice with specific reasons; i. All SSC members will be neutral and independent in performing their duties. However, any administrative matter of the SSC will be referred to the Board; and j. Along with performing duties according to Shariah laws and policies, instructions of Bangladesh Bank and other regulatory institutions, they must properly comply with other terms of the appointment letter.

7. Election of Chairman and Secretary of SSC and formation of Shariah Secretariat: a. The Board of Directors must elect one of the SSC members as Chairman for a maximum term of 03 (three) years. He will serve as the Secretary of the main committee of the bank's Shariah Secretariat, but he will not have any voting power; b. In the case of reappointment of existing SSC members, the Chairman position will always be vacant. If the Chairman cannot attend a meeting, one of the attending members will preside; c. The bank management must form a Shariah Secretariat comprising the Shariah Advisory Committee (SAC), Shariah Supervisory Committee (SSC), Shariah Audit Unit (SAU), and other departments/units as needed. There must be an approved written operations manual and work structure clearly outlining the roles, responsibilities, and authorities of the SAC, SSC, SAU, and other departments/units. The Shariah Secretariat must be formed by the bank management comprising the aforementioned departments/units. The Shariah Secretariat will provide all necessary assistance regarding the agenda, proposals, recording, minutes of SSC meetings, and Shariah opinions/rulings/fatwas issued by the SSC. The Shariah Secretariat will maintain internal coordination between the SSC and bank management. It is mentioned that Shariah-related programs of the Shariah Secretariat, SAC, SSC, SAU, and other departments/units will be supervised by the SSC, and they will report to the SSC on this matter; d. The grade of the Head of the bank's Shariah Secretariat will be determined in accordance with the scope and size of the concerned bank. However, for full-fledged Islamic banks, this grade must be within a minimum of 4 (four) posts immediately below the Chief Executive Officer/Managing Director of the bank, and for conventional commercial banks having Islamic banking branches and windows, this grade must be within a minimum of 5 (five) posts immediately below the Chief Executive Officer/Managing Director of the bank. However, he must have at least 10 (ten) years of direct Islamic banking experience, and e. The Shariah Secretariat must ensure the deployment of an adequate number of qualified and experienced personnel with higher degrees in Shariah and Islamic banking. Regular training on Islamic banking and finance must be arranged for SSC members and other staff of the Shariah Secretariat.

8. Roles and responsibilities of SSC: a. The SSC must review all policies, rules and regulations, procedures, manuals, contracts, products, services, promotional materials, and other legal and operational documents used in the commercial transactions of the concerned bank (specific for Islamic branches and windows); b. The SSC must supervise and review the method of calculating profit/loss and the distribution of appropriate profit to Investment Account Holders/Depositors; c. The SSC will supervise the Zakat calculation and distribution process. Additionally, they will provide opinions on the source, formation, management, calculation, etc., of the Qard Fund; d. In launching new deposit and investment facilities (DIFs), the bank's own SSC's fatwa/rule/declaration, Shariah guidelines/declarations/resolutions issued by Bangladesh Bank, and international best practices that do not contradict domestic laws and customs and other instructions of Bangladesh Bank must be ensured. However, prior approval of Bangladesh Bank must be obtained to launch any new DIF outside the Shariah guidelines/declarations/resolutions issued by Bangladesh Bank; e. The Shariah Secretariat must prepare a Shariah audit plan at the beginning of each year/alternate year. The said audit plan must be approved by the SSC. The SSC will regularly (at least quarterly) monitor the implementation of the above audit plan and summarize objections raised in the audit. They will provide necessary instructions to the bank management. The SSC will inform the Board of Directors about serious objections raised, if any; f. Steps must be taken to reduce non-compliant income, doubtful income, and interest-based income, and to determine the appropriate process for disposal of such income and ensure its proper use; g. If Shariah non-compliance is identified in the bank's programs, the SSC will take necessary steps to correct it and prevent recurrence of the same/similar problems in the future. The bank will take immediate corrective/preventive measures according to the SSC's advice; h. The SSC's decision on Shariah-related matters will be considered final. The Board of Directors/bank management will be bound to implement such decisions; i. If Shariah non-compliance recurs, the SSC will inform the Board of Directors of the bank and request necessary corrective measures. However, if the mentioned Shariah non-compliance/irregularity continues, the SSC will inform Bangladesh Bank and mention it in the bank's annual Shariah non-compliance report; j. If a difference of opinion arises between the SSC and the concerned bank's management, Executive Committee, Audit Committee, or Board on Shariah-related matters, the SSC will inform Bangladesh Bank regarding the matter; k. For those conventional banks providing Islamic banking services, the SSC will ensure in their report that the funds of Islamic branches/windows are kept separate from the funds of conventional banking; l. The bank will be bound to provide information as required by the SSC. Furthermore, the SSC will have access to any records, transactions, and information of the concerned bank; m. The SSC will take initiative to organize training and/or orientation programs on Islamic banking and finance for the representative sections of stakeholders of the concerned bank; n. SSC members will participate in at least 02 (two) trainings/workshops per year on Islamic banking and finance; and o. The operations of the SSC will be conducted by separate internal by-laws (Bye-laws) duly approved by the Board of Directors of the concerned bank.

9. Shariah Supervisory Committee (SSC) Meeting: a. The SSC will hold meetings at least quarterly (maximum six times a year); b. The SSC may hold additional meetings as needed for urgent/necessary advice/opinion on Shariah-related matters; c. To inform the Board of Directors of the bank's prevailing situation, arrangements must be made to meet the Board of Directors at least twice a year (once every six months) (outside the regular schedule); d. A quorum (at least two-thirds of SSC members) must be maintained for SSC meetings; e. If necessary, experts/professionals may be invited to give opinions on specific matters. Invited guests will not have voting rights. Furthermore, the SSC may take advice from the Islamic Banking Regulation and Policy Department of Bangladesh Bank as needed. However, fatwas cannot be obtained from any other institution/board on such matters. No financial connection with any such institution/board will be maintained for this purpose. f. Each SSC member must attend at least 75% of the total meetings held in a year, and he cannot appoint another person to attend the meeting on his behalf; and g. If a member/Chairman cannot attend a meeting for any reason, the matter must be informed to the SSC Secretary. If a member/Chairman is absent without approval from 03 (three) consecutive meetings, his position will be considered vacant.

10. Decision-making process and minutes of SSC meetings: a. SSC members will make decisions and provide explanations on Shariah laws and policies through their own knowledge, wisdom, intelligence, experience, and critical analysis. Decisions will be taken based on the majority opinion of the members. In case of disagreement, the matter of disagreement must be recorded in the minutes. Furthermore, the opinion of each member given in the meeting must be recorded in the minutes; b. The SSC must ensure that all decisions taken and/or fatwas issued in the meeting minutes, along with detailed reasoning (Fiqh or otherwise) and notes of dissent or different opinions (if any), are properly described; c. The meeting minutes of the SSC will be signed by the Chairman and Secretary. The meeting minutes must be submitted to the Board of Directors of the bank and the IBRPD of Bangladesh Bank within 15 days of each meeting; and d. All minutes must be preserved by the Shariah Secretariat for future reference. It may be sent to the internal auditor, external auditor, and regulators upon request.

11. Preparation of Shariah-related reports: In the case of subsequent transactions after offering deposit and investment facilities to customers, the internal Shariah audit/monitoring department will submit a report to the SSC verifying whether Shariah governance or discipline has been properly followed.

12. Annual Shariah Compliance Report: a. The SSC must submit an annual Shariah compliance report to the Board of Directors of the concerned bank. After monitoring and taking necessary steps, this report must be sent to the IBRPD of Bangladesh Bank within 02 (two) months of the end of each year/alternate year, and the subsequent shareholders must be informed; b. Each Shariah-based bank (full-fledged Islamic bank/conventional commercial banks having Islamic banking branches and windows) must compulsorily publish the annual Shariah compliance report on their website. The annual Shariah compliance report must include at least the Shariah declarations/resolutions issued by the SSC so that the SSC's decision-making process is clear; and c. If the bank deems it necessary, it may prepare a fact-finding report through an independent and neutral third party on any incident regarding Shariah discipline with the approval of the Board of Directors, and submit the fact-finding report to the Board of Directors for necessary steps.

13. Evaluation of SSC members' performance: a. The Chairman of the SSC will evaluate the performance of other members according to the guidelines prepared by the SSC and approved by the Board, and other SSC members will separately evaluate the Chairman's performance. This process must be completed within the next 2 (two) months after the end of each year/alternate year and submitted to the Board of Directors. The evaluation process will be related to the accountability and transparency of the SSC; and b. After receiving the performance evaluation report, the Board of Directors will verify it properly. Based on the performance evaluation, the Board of Directors will decide whether to reappoint specific SSC member(s) or terminate the contract.

14. Confidentiality maintained by SSC: a. While serving as a member of the SSC of one bank, or even after being relieved from the duty, he must keep confidential the various information of the bank collected by him for the purpose of issuing fatwas or instructions; b. The confidentiality of any confidential or sensitive information obtained by SSC members that could be detrimental to the bank or give competitive advantages to the bank's competitors must be ensured; and c. A written commitment (Appendix-B) to maintain confidentiality during data collection and analysis must be mentioned in their appointment contract.

15. These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991.

16. These instructions will come into effect from 01 January 2026.

Yours faithfully, (Muhammad Anisur Rahman) Director (IBRPD) Phone: 9530335

Appendix-A Declaration Form

1. I hereby declare that- according to the rules mentioned in IBRPD Circular No.-01 issued by Bangladesh Bank on 28 September 2025, I am eligible to be appointed as a member of the SSC of the bank-company. I also declare that- a. I have not been convicted by any competent court, nor was I involved in fraud, economic crime, or other irregular activities, nor am I involved in any moral misconduct; b. I have not violated any order, directive, or instruction of the regulatory authority (which is not contrary to Shariah); c. I am not a director of any bank established under the Bank Company Act, 1991, any financial institution established under the Finance Company Act, 2023, any insurance company, or any institution regulated by such companies, nor am I appointed in any profitable position in such institutions; d. I have no commercial interest in the concerned bank, no connection with any institution owned, interested in, or controlled by any director of the concerned bank, and no member of my family is part of the Board of Directors of such banks or companies; e. I am not in default of payment of dues to any bank or financial institution, nor am I a personal guarantor, owner, partner in a partnership firm, director, CEO, or head of a company or other corporate body in Bangladesh, and I am not in default of tax and loan/investment; f. I have not been prohibited by any religious institution/authority recognized by the government from issuing fatwas on religious laws; g. I do not hold any administrative and/or permanent position in any bank or financial institution; h. I have no direct or indirect connection or interest in the ownership of the following institutions: (i) The bank where I am appointed as an SSC member, (ii) Institutions related to the concerned bank, (iii) Stock Exchange members, and (iv) Corporate brokerage house members. Furthermore, I am not an employee of any of the aforementioned institutions; and i. I will immediately inform the SSC Secretary of the bank about any change in my workplace, business status, business, or local address.

2. I hereby declare that, I am appointed as a member of the SSC of ------------------ Bank PLC, and I agree to perform this duty.

Signature: Date and Name: Witness (Bank Officer):

1. Signature: Name: Designation: Address:
2. Signature: Name: Designation: Address:

Appendix-B Confidentiality Declaration Form

I, the undersigned, hereby assure that, if I am appointed as a member of the SSC of ------------------ Bank PLC, I will not disclose any matter presented for my consideration or any matter brought to my notice as a member of the SSC to any person directly or indirectly. However, I will disclose it only if it is necessary for the performance of my duties, or if compelled by the provisions of prevailing law, or if authorized by the Board.

Signature: Date and Name: Witness (Bank Officer): 1) Signature: Name: Designation: Address: 2) Signature: Name: Designation: Address: