Military intelligence body roots for Islamic banks | india | Hindustan Times
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Military intelligence body roots for Islamic banks

It aims to 'prevent' the Bangladesh's central bank from circulating new guidelines meant to monitor the transactions by Islamic banks.

india Updated: Jul 03, 2006 19:22 IST

In a move described as "unprecedented", Bangladesh's military intelligence body has stepped in along with Islamist political parties to "prevent" the country's central bank from circulating new guidelines meant to monitor the transactions by Islamic banks.

The Directorate General of Forces Intelligence (DGFI), the country's principal military intelligence organisation, has formally written to the finance ministry recommending that Bangladesh Bank (BB), which revised its guidelines recently, should further revise them "in line with the wishes of a focus group comprising Islamic economists, bankers and Shariah Council experts".

The Daily Star newspaper in a front page report called this "an unprecedented move", and that it was "going out of its jurisdiction". The DGFI is akin to Pakistan's Inter Services Intelligence (ISI), with no role in banking operations.

The DGFI urged that BB should not modify or add any idea to the focus group recommended guidelines. "The report all along echoed the recommendations of various Islamic groups and advised the central bank on how to protect the interest and image of the four-party alliance government," the newspaper said, referring to the presence of the Islamic Oikya Jote in the ruling alliance.

"If the Bangladesh Bank refrains from circulating the [focus group-recommended] guidelines under pressure from some higher authority, the forces opposing the alliance government might take an initiative to implement the guidelines during the caretaker government's regime.

That could create a negative impact on the alliance government during the next election," the DGFI report pointed out.

The central bank in February finalised the new guidelines for Islamic banking that makes the provision for Shariah Council optional. The guidelines also allow banks to decide whether they want to be a member of the Shariah Council.

According to the new guidelines, a bank may form a Shariah supervisory body to monitor its Islamic banking services but the board of directors of that bank will be accountable to the central bank for its overall operation.

Presently, banks have their own Shariah Councils and there has been a Central Shariah Council to look into whether Islamic banking as a whole is in compliance with the Islamic principles.

Before scripting the guidelines, BB formed a focus group comprising Shariah Council members and representatives from different Islamic banks. The Shariah members, at the meetings of the focus group, recommended making Shariah Council mandatory to keep exerting their influence like before.

However, when the central bank framed the final guidelines it did not accommodate the council's recommendations.