Restricted Investment Account

Definition of "Restricted Investment Account"

Relating to Islamic banking, refers to an investment account in which the bank has the authority to invest the account holder’s funds on the basis of mudarabah contract or agency based contract for investment, but has certain restrictions as to where, how and for what purpose the funds are to be invested. Further, the Islamic bank may be restricted from commingling its own funds with the restricted investment account funds for purposes of investment. In addition, there may be other restrictions which investment account holder may impose. For example, investment accounts holders may require the Islamic bank not to invest their funds in instalment sales transactions or without guarantor or collateral or require the Islamic bank carry out the business itself rather than through a third party.