KARACHI: The board of directors of MCB Bank Limited has approved the sale of the bank’s entire Islamic banking operation to its wholly-owned subsidiary MCB Islamic Bank Limited (MCBIBL) for Rs7.946 billion, officials said on Wednesday.
The officials said MCB Bank Limited has finalised the sale of the entire operations of its Islamic banking group to MCBIBL.
An official said the bank’s board of directors approved the scheme of compromises, arrangements and reconstruction between MCB Bank and MCBIBL, “which aims to segregate and demerge operations, assets and liabilities of Islamic banking group of MCB Bank and to transfer the same to MCBIBL, which is wholly-owned subsidiary of MCB Bank against payment of cash worth Rs7.946 billion.”
The official said the demerger of 34 branches of Islamic banking group of MCB Bank would provide independence in operation and expand Islamic banking based on Shariah
The official said the business performance and shareholders’ value of each bank will be enhanced.
“Demerger will provide scope for independent collaboration and expansion without committing the existing organisation in its entirety,” according to the scheme.
“The principal object of this scheme is to segregate and demerge operations, assets and liabilities of Islamic banking group of MCB,” it read.
The authorised share capital of MCB Bank is Rs15 billion and paid-up capital Rs11.130 billion, while the authorised share capital of MCB Islamic Bank Limited is Rs15 billion and paid-up capital is Rs10 billion.
As of June 30, Islamic banking business of MCB was operating with a network of 34 branches having an asset base of Rs21.015 billion.
The MCB’s Islamic banking business posted a net profit of Rs408.228 million for the half-year ended June 30, 2015.
Islamic banking industry in Pakistan has been growing at a fast pace ever since its re-launch in 2001.
The Islamic banking industry now represents 10 percent of overall banking system with 19 banking institutions offering Islamic banking products and services.
The State Bank of Pakistan (SBP) initiated three-prong strategy in 2001 and facilitated establishment of Islamic banks, Islamic banking subsidiaries of commercial banks and dedicated Islamic banking branches by the conventional commercial banks.
The SBP has issued detailed licencing criteria, instructions and guidelines for Shariah-compliance, instructions for profit and loss distribution and pool management
The State Bank has adopted standards of Malaysia-based international standard-setting organisation Islamic Financial Services Board and Bahrain-based not-for-profit organisation Accounting and Auditing Organization for Islamic Financial Institutions.
“The sanctioning of the scheme and the making of other appropriate orders in connection therewith will be considered by the Lahore High Court after the scheme is approved by the members,” said the bank.
The bank’s extraordinary general meeting to approve the transaction is scheduled for 8 January.
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