Deposit

Our Islamic Banking Deposit Products illuminate your choices by providing you Shariah Compliant Solutions for a simple reason: we value what you believe in. At RBS Islamic Banking, we bring together products and services that comply with not just your needs but also your beliefs.

Savings and Term Deposit Accounts at RBS Islamic Banking have been developed under the Islamic Banking principles: Mudarabah and Musharakah. In this arrangement, the depositors are "Raab-ul-Maal" (investors) and the Bank is the "Mudarib" (the Fund Manager) and in some instances the Investor as well.

Mudarabah Defined
For us at RBS, it is about what you trust in. Thus, we have incorporated the Islamic mode of "Mudarabah". This is a type of partnership where one partner provides funds while the other partner manages those funds. Profits from this partnership are distributed according to pre-defined ratios.

Musharakah Defined
Working together is important for progress to commence. The Islamic mode of "Musharakah" provides another type of partnership where two or more individuals invest their funds and share the profit according to pre-defined ratios and share losses according to the ratio of investment.

How do Savings and Term Deposit Accounts work?
In simple words, our Deposit products are structured in a way that the Savings and Term Deposits from our Clients go into a pool of funds maintained by the Bank. RBS Islamic Banking, as the Fund Manager (Mudarib) invests these funds into Shariah Compliant assets / investments and the resulting profit is distributed between the Bank and Depositors according to pre-defined ratios and weightages. In some cases, the Bank may also invest its funds in the pool and become a partner with the Depositors within that pool.
Thus, Savings and Term Deposit Accounts function under a hybrid arrangement of Mudarabah and Musharakah.

How do Current Accounts work?
A Current Account is operated on the basis of “Qard”; where the funds from the Depositors are treated as a loan for the Bank and no profit of any kind is payable to the Depositors but the principle is guaranteed and payable to the client on demand.

Profit Sharing Mechanism Explained
Client deposits collectively go into a pool of funds and RBS Islamic Banking as the Fund Manager (Mudarib) invests these funds into Shariah Compliant assets / investments. The relationship between RBS Islamic Banking and the Depositors is that of a Mudarib and Raab-ul-Maal.
For example, assume we have five categories of Depositors that hold the following account types: (i) Savings (ii) 1 Month Term Deposit (iii) 3 Months Term Deposit (IV) 6 Months Term Deposit (v) 1 Year Term Deposit.

The Bank receives a total of Rs. 20,000 from these five categories of Depositors and each category is assigned a specific weightage:

The profit earned by investing the funds in Islamic assets / investments is distributed between the Bank and the depositors according to weightages announced on the 1st of every month.

As an illustration of profit distribution ratio* between RBS Islamic Banking and the Depositors, we assume that the ratio is equal (i.e. 50 / 50 as shown in the table below) and the earned profit is Rs. 4,000/- for that month. Thus the profit will be distributed as follows:

RBS Islamic Banking may also invest its own funds in the pool and in that case will also get a share in the distributable profit like other Depositors. Furthermore, the profit of Rs. 2,000 will be distributed within the Depositors based on the assigned weightages in the following manner:

*The above profit rates and profit distribution ratio (Mudarib fee) are for illustration purposes and are not the indicative profit rates of RBS Islamic Banking. The weightages of RBS Islamic Banking will be announced on preset dates.
This clearly indicates profit sharing mechanism between the Bank and the pool as well as the Depositor.

Loss Sharing between the Bank and the Pool
In case of a loss, as per the Islamic Financing principle of Mudarabah the loss will be borne by the Raab-ul-Maal (Depositors) while the Mudarib (RBS Islamic Banking) will get nothing for its effort which will in turn be a loss to the Bank.

Concept of Weightages
The concept of weightages is being used by Islamic Banks because we face the challenge of distributing profits among a wide variety of Depositors with varying tenures and amounts. Depositors continually close their accounts or decrease their balances with the Bank. In order to tackle this, the Bank assigns a weightage to a specific deposit based on its amount and tenure so as to create a balance in profit returns to these various deposit categories.

Ensuring Shariah Compliance
We at RBS Islamic Banking ensure that all our products strictly meet the highest standards of the Islamic Shariah. This is why we have in-house Shariah Advisor, who is also advised by our Global Shariah Advisory Board consisting of eminent Shariah Scholars to oversee all banking transactions and business dealings.

For any queries on Islamic Banking and Finance please feel free to schedule a meeting with our Islamic Banking team by calling your Relationship Manager at 111-11-71-72.
You may also call our Customer Interaction Centre at 111-06-06-06.