Profit-Sharing Arrangement with Depositors

Income derived from the investment of PLS deposits only should be distributed among the PLS depositors according to a contract details of which should be incorporated into the account opening application form. Income earned from foreign branches, current account deposits and the non-fund- based income earned from the services rendered by banks should go to shareholders only. The income earned from the use of PLS deposits only should be distributed among the PLS depositors. According to the terms of agreement, banks should receive a specified portion of income earned from the use of PLS deposits. Banks should meet their expenses out of this portion and the saving should be their profit for managing the PLS deposits.

The existing system is too much open-ended and has been used to the detriment of the PLS depositors. At present, the banks are at liberty to charge all expenses to the PLS income and there is no check on them. They spend as much as they like at the cost of their PLS depositors who have neither any say nor any control in this matter. In fact, there is need to publish the income account of the PLS operations of banks and the PLS depositors should have a right to discuss the PLS income account in a meeting of such depositors.

Dr Ziauddin Ahmad

Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.