vi vill, Framework of Rate of Return prior declaration of the same before starting of the accounting year/at the time of Mudaraba contract, Mudaraba deposits shall get priority in the matters of investment over Bank’s Equity and other Cost-Free Fund i.e. Bank's Equity & Cost Free Fund will be deployed only after full investment of Mudaraba deposits, Bank's Equity shall mean and include paid up capital, statutory reserve, investment loss off-setting reserve, general reserve and any other reserve or fund created by the bank Cost Free Fund means any type of funds received by the bank free of cost and not for sharing any income of the bank. Mudaraba fund accepted by the Islamic bank shall be utilized in all sorts of investment activities (ie. general investment, investment in shares & securities, placement with other banks and financial institutions etc.) approved by the bank's Shariah Supervis Bank. ry Board as well as Board of Directors of the Income from Exchange Gain derived from buying & selling of foreign currency should be shown separately (in the Annexure-1) and to be added in the distributable income for the purpose of distribution of profit to depositors. Islamic Banks = and Islamic Branches of the Conventional Banks will be required to assign weightage to all types of Mudaraba deposits. The weightage will represent the importance attached to the holding of each deposit in determination of profit. In this context, the assumption held is that longer the tenure of a Mudaraba deposits, the higher the risk, ‘The weightage and any subsequent change in weightage of Mudaraba deposits should be disclosed to Mudaraba depositors before the starting of any accounting year/ Mudaraba contract. Profit may be calculated on different types of Mudaraba deposit accounts as per their respective rules for time & manner of deposit and withdrawal restrictions. 70xi, Mudaraba deposits shall mean average balance of all types of Mudaraba deposit accounts standing in the books of the bank as on last day of each month during the accounting year to which the distribution of income relates after deducting Statutory Liquidity Reserve to be maintained as per Bank ‘Company Act, 1991 (as per Annexure-1). Framework The framework encompasses three types of tables: Table-1: Profit Calculation Format-1: Ratio of Participating Fund in the Outstanding Investment for the accounting year (as shown in Annexure-1). ‘Table -2: Profit Calculation Format-2: Distributable Profit for the accounting year (as shown in Annexure-2). Table-3: Profit Calculation Format-3: Allocation of Distributable Profit to Mudaraba Depositors and the rate of retum for the accounting year (as shown in Annexure-3). 6. Methodology ‘The methodology in deriving the distributable profit to Mudaraba depositors using the three tables described in Para 5 could be better understood from the following example: Example: Business information of an Islamic bank as on 31/12/2004 is given below: 1. Paid up Capital & Reserve 2. Total Al-Wadiah and Other Cost Free deposits 120 ‘Sub Total 20 3. Mudaraba Deposits: a) M, Hajj Deposits above 10 years 5 b) M. Special Saving Scheme up to 10 years 30 c) M. Savings Bond for 5 years 5 4d) M, Savings Bond for 8 years 10 ¢) M, Term Deposits for 3 months 80 aFramework of Rate of Return ‘Tk in Crore £) M. Term Deposits for 6 months 100 2) M. Term Deposits for 12 months 90 h) M, Term Deposits for 24 months 70 1) M, Term Deposits for 36months 100 jj) M. Savings Deposit 250 k) M. Short Notice Deposit (SND) 40 | ‘Total Mudaraba Deposi ‘Tk. 780 Crore Total Fund (220 + 780) = Tk. 1000 Crore ‘Total Outstanding Investment 800 | (Excluding profit receivable, profiten/compensation suspense etc.) | Gross Investment income 96 Assume that the above figures of all types of funds and investments have been continued in average from January to December 2004 and Profit Sharing Ratio (PSR) between the Mudaraba deposits and the bank (Mudarib) is 65:35 and SLR is 10%. Other information: Mudaraba Deposits: Weightage a) M, Hajj Deposits above 10 years 33 b) M. Special Saving Scheme up to 10 years 130 ©) M. Savings Bond for 5 years 1.10 d) M. Savings Bond for 8 years 125 €) M, Term Deposits for 3 months 0.88 f) M. Term Deposits for 6 months 0.92 g)M. Term Deposits for 12 months 0.96 hh) M. Term Deposits for 24 months 0.98 1) M, Term Deposits for 36months 1.00 j) M. Savings Deposit 0.75 k) M. 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