KARACHI: The State Bank of Pakistan (SBP) has unveiled a new mechanism for Islamic Banking Institutions (IBIs) to utilize Government of Pakistan Ijara Sukuk (GIS) held in the Central Depository Company (CDC) as collateral for accessing the Shariah-Compliant Standing Ceiling Facility and Open Market Operations (OMO) Injections.
This initiative aligns with SBP’s ongoing efforts to enhance liquidity management tools for Shariah-compliant financial institutions.
Since 2021, SBP has provided Modaraba-based Shariah-compliant Standing Ceiling Facility and OMO-Injections. Following the availability of benchmark/revaluation rates for GIS issued through the Pakistan Stock Exchange (PSX) and held in CDC, SBP has introduced the mechanism for eligible IBIs to avail Modaraba-Based Financing Facilities (MFFs) against GIS (CDC) as collateral.
To access these Shariah-compliant MFFs, IBIs must pledge GIS (CDC) as collateral in favor of SBP, using the Central Depository System (CDS) of CDC. This will be done through Group IDs created by SBP in CDS for GIS (CDC) pledging.
As per the new mechanism, the collateral’s market value must meet or exceed the total financing amount, including the expected profit and applicable haircut, in line with SBP’s collateral requirements, which may be updated periodically. The market value of GIS (CDC) used as collateral will be determined based on the revaluation rates published by the FMAP on the last working day before the facility request.
SBP clarified that the collateral pledged will be considered encumbered and will not count toward the Statutory Liquidity Requirement (SLR) of the IBIs during the facility period. Once deal confirmation is received from the IBI and the pledge is confirmed in CDS in favor of SBP, the financing funds will be transferred to the IBI’s current account at SBP.
On the settlement or maturity date of the MFF transaction, SBP will debit the IBI’s current account to recover the financing amount and the profit (calculated at the expected profit rate). The pledged securities in CDS will be released once the transaction is settled.
The previous provisions for availing MFFs against GIS (CDC) collateral remain applicable. SBP has also advised IBIs to submit the deal confirmation letter, in the revised format, via the Data Acquisition Portal (DAP), signed by authorized signatories, to the Chief Manager, SBP (BSC) Karachi Office.
This new mechanism aims to further streamline the process and support the efficient functioning of Shariah-compliant financing for IBIs.
