Islami Bank, Definition, History and Interest (Chapter 1)

Islami Bank — Definition, History & Interest (Chapter 1)

Updated for Mercantile Bank PLC (MBPLC) — Taqwa Islamic Banking  |  Deposit Products & Current Profit Rates  |  Source: bankessentials.blogspot.com

1. Definition of Islamic Bank (OIC Approved)

"Islami Bank is a Financial Institution, whose statutes, rules and procedures expressly state its commitment to the Principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations."

Approved by: OIC Foreign Ministers Summit, Dakar, Senegal — 1978

Bangladesh Bank Definition (Guidelines for Islamic Banking, 2009): Islamic Bank means a company or Islamic Banking Branch(es) licensed by Bangladesh Bank, which follows Islamic Shariah in all its principles and modes of operations and avoids receiving and paying of interest at all levels.

🧠 Mnemonic — Remember the Definition

S R P = No Interest Statutes + Rules + Procedures — all three must expressly ban interest.
"SRP — Shariah Runs Properly, No Interest Allowed."

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2. History of Islamic Banking

Earlier banking meant only an interest-based capitalist system. Over time, its failures led to wealth disparity, social imbalance and economic recession — all wealth merged to the rich, damaging social balance. This gave rise to research in Islamic Banking from the 1930s. "Pilgrims Savings Corporation" was an early milestone in Malaysia.

Key Milestones

Year / Event	Detail
1930s	Research books & journals on Islamic Banking; Pilgrims Savings Corporation established in Malaysia
1963 — Egypt	First Islamic Bank: Mitgamar Savings Bank by Dr. Ahmed Al Naggar
1963 — Malaysia (Official)	Tabung Haji — officially recognised as the first Islamic Bank
1974	IDB Charter signed at OIC Finance Ministers Conference
20 October 1975	IDB officially comes into being
Bangladesh	Mercantile Bank PLC — Taqwa Islamic Banking via 45 Islamic Banking Windows (IBWs)

🧠 Mnemonic — History Sequence

NAT → IDB Naggar (Egypt 1963) → Asia / Tabung Haji Malaysia (1963) → IDB (1975)
"NAT then IDB — Naggar And Tabung, then IDB was born."

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3. Mercantile Bank PLC (MBPLC) — Taqwa Islamic Banking

Vision

Would make finest corporate citizen.

Mission

Will become most caring, focused for equitable growth based on diversified deployment of resources and nevertheless would remain healthy and gainfully profitable bank.

Key Identity & Management

Item	Detail
Slogan	বাংলার ব্যাংক (Banglar Bank)
Corporate Motto	Efficiency is our strength
Islamic Banking Brand	Taqwa Islamic Banking
Name Change	Mercantile Bank Limited → Mercantile Bank PLC on 27 August 2023
Incorporation	20 May 1999
Commencement of Business	02 June 1999
Current MD & CEO	Md. Mati Ul Hasan (w.e.f. 30 November 2024) — Previously AMD & CRO
Previous MD (7th)	Md. Quamrul Islam Chowdhury (Former)
First MD	M. Taheruddin
Chairman, Board	Md. Anwarul Haque

MBPLC Network (As of 2026)

Network Item	Number (2026)
Branches	153
Sub-Branches	48
Islamic Banking Windows (IBW)	45
ATMs	197
Agent Banking Outlets	188
AD Branches	22
Offshore Banking Units (OBU)	2
Subsidiaries	Mercantile Bank Securities Ltd  |  MBL Asset Management Ltd  |  Mercantile Exchange House (UK) Ltd

🧠 Mnemonic — MBPLC Network Numbers

153 · 48 · 45 · 197 · 188 · 22 · 2 "One-Five-Three branches stand tall,
Four-Eight sub-branches serve them all,
Forty-Five Islamic windows shine,
One-Nine-Seven ATMs in a line,
One-Eight-Eight agents at your door,
Twenty-Two ADs & Two OBUs more!"

Core Values (7) & Ethics (7)

7 Core Values — CIECSS	7 Ethics — REST FCC
Customer Delight	Responsible
Innovation	Ethical
Ethical Values	Sustainable
Caring for Human Resources	Transparent
Commitment	Friendly
Socially Responsible	Compliant
Shareholders Value	Confidential

🧠 Mnemonic — Core Values & Ethics

CIECSS    REST FCC Core Values: "Can I Ever Count Colleagues' Sincere Support?"
Ethics: "A bank at REST follows FCC rules."

Strategic Objectives (5)

• To increase shareholders' value
• To achieve economic value addition
• To be market leader in product innovation
• To be one of the top three financial institutions in Bangladesh — in terms of efficiency
• To be one of the top five financial institutions in Bangladesh — in terms of market share

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4. MBPLC Taqwa Islamic Banking — Deposit Products & Profit Rates

The following deposit products are offered under MBPLC Taqwa Islamic Banking, with current provisional profit rates effective March 2026.

i. Al-Wadiah & Mudaraba Current / Savings Accounts

Account Name	Abbr.	Current Provisional Profit Rate
Al-Wadiah Current Account	AWCA	—	Nil (No profit — Al-Wadiah basis)
Mudaraba Savings Account — General	MSA	3.00%
Mudaraba Savings Account — Staff	MSA-Staff	3.00%
Taqwa Mudaraba Payroll Account	TMPA	5.00% (2% higher than MSA)
Taqwa School Banking Account	TSBA	3.50%

ii. Taqwa Bonus Sanchaya Hishab (TBSH) — Slab-Based

Daily Minimum Balance (BDT)	Current Provisional Profit Rate
BDT 5,000 – BDT 50,000	3.00%
BDT 50,001 – BDT 1,00,000	4.00%
BDT 1,00,001 – BDT 5,00,000	5.00%
BDT 5,00,001 – BDT 10,00,000	6.00%
BDT 10,00,001 & Above	7.00%

iii. Mudaraba Special Notice Deposit (MSND) — Slab-Based

Balance	Current Provisional Profit Rate
Less than BDT 1 crore	1.00%
1 crore to less than 25 crore	1.50%
25 crore to less than 50 crore	2.50%
50 crore to less than 100 crore	3.00%
100 crore and above	3.50%

iv. Mudaraba Term Deposit Receipt (MTDR) — Daily Basis

Tenure	Amount Slab	Current Provisional Profit Rate
61D to 99D	Below Tk.1.00 Crore	7.00%
61D to 99D	Tk.1.00 Crore & Above	7.50%
100D to 199D	Any Amount	8.25%
200D to 299D	Any Amount	8.50%
300D to 360D	Any Amount	8.75%

v. MTDR — Monthly Basis

Tenure	Amount Slab	Current Provisional Profit Rate
MTDR-1M	Any Amount	3.00%
MTDR-3M	Below Tk.1.00 Crore	8.00%
MTDR-3M	Tk.1.00 Crore & Above	9.00%
MTDR-6M	Below Tk.1.00 Crore	8.50%
MTDR-6M	Tk.1.00 Crore & Above	9.50%
MTDR-12M	Below Tk.1.00 Crore	9.50%
MTDR-12M	Tk.1.00 Crore & Above	9.75%
MTDR-24M	Any Amount	9.75%
MTDR-36M	Any Amount	10.00%

vi. Mudaraba Masik Sanchaya Prokolpo (MMSP)

Tenure	Current Provisional Profit Rate
1 Year	8.50%
3 Years	10.00%
5 Years	10.50%
8 Years	11.00%
10 Years	11.50%

vii. Mudaraba Super Munafa Amanat Prokolpo (MSMAP)

Particulars	Tenure	Current Provisional Profit Rate
Mudaraba Super Munafa Amanat Prokolpo	1 Year / Auto renewal	10.80% p.a. (Tk.900/month per Tk.1,00,000 — before tax)

viii. Mudaraba Masik Munafa Amanat Prokolpo (MMMAP)

Particulars	Tenure	Current Provisional Profit Rate
Mudaraba Masik Munafa Amanat Prokolpo	3 / 5 Years / Auto renewal	10.20% (Tk.850/month per Tk.1,00,000 — before tax)

ix. Taqwa Bibaho Sanchaya Prokolpo (TBSP)

Tenure (Years)	Installments	Current Provisional Profit Rate
3 Years	36	10.25%
5 Years	60	10.50%
8 Years	96	10.75%
10 Years	120	11.00%
12 Years	144	11.00%
15 Years	180	11.00%
18 Years	216	11.00%
21 Years	252	11.00%

x. Taqwa Mohorana Sanchaya Prokolpo (TMSP)

Tenure (Years)	Installments	Current Provisional Profit Rate
3 Years	36	10.25%
5 Years	60	10.50%
8 Years	96	10.75%
10 Years	120	11.00%

xi. Taqwa Mudaraba Hajj Sanchaya Prokolpo (TMHSP)

Particulars	Current Provisional Profit Rate
Taqwa Mudaraba Hajj Sanchaya Prokolpo (TMHSP)	11.00%

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5. Riba (Interest) — Definition & Types

Interest is any predetermined excess which is paid or received with the passage of time on principal of loan as a condition of loan and for which no counter value is paid or received and which is not related with the usage and result of loan.

Types of Riba

Type	Explanation
Riba Al-Nasia	Related to loan and time — predetermined excess charged with passage of time on principal; most common in modern banking
Riba Al-Fadl	Related to goods — excess in hand-to-hand exchange of same type of commodities of different quality

Quranic References on Riba (4 Suras)

Surah	Verse(s)
Surah Ar-Rum	Verse 39
Surah An-Nisa	Verses 160–161
Surah Al-Imran	Verse 130
Surah Al-Baqarah	Verses 275–281

🧠 Mnemonic — Types & Suras

N=Notes   F=Food   |   RNIB Nasia = Notes / money over time  |  Fadl = Food / goods in exchange
Suras: Rum · Nisa · Imran · Baqarah — "Riba Noted In the Book"

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6. Difference Between Profit and Interest (Riba)

Profit	Interest (Riba)
1. Earned through buying and selling	1. Realized from loan with passage of time
2. Achieved by capital, merit, time and striving	2. Taken only for giving loan
3. Uncertain and undetermined	3. Certain and prefixed in advance
4. Charged only once; does not increase with time	4. Changes and increases in course of time
5. Bears the risk of business	5. Does not bear the risk of business
6. Halal (Permissible)	6. Haram (Prohibited)

🧠 Mnemonic — Profit vs Interest

Profit = URH  |  Interest = CNH Profit = Uncertain + takes Risk + Halal  |  Interest = Certain + No risk + Haram

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7. Demerits of Interest (7 Demerits)

• Creates parsimony and greed
• Provokes grievances and social tension
• Social degeneration
• Creates "Julm" (injustice / oppression)
• Causes Inflation
• Makes depositors idle — no incentive for productive investment
• Leads to less investment in the economy

🧠 Mnemonic — 7 Demerits

PGS JIL Parsimony | Grievances | Social degeneration | Julm | Inflation | Idle depositors | Less investment
"PGS JIL — Poor Greed Spreads, Justice Is Lost."

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8. Common Shariah Irregularities in Islamic Banking

Common Lapses: No sale-buy, no cash memo, no LC authorization, profit charged in various sequences of the same product, rent charged in gestation period.

A. General Banking Lapses

• Account opened without necessary papers and proper authority approval
• Cheque book issued but kept undelivered
• Depositors' signatures not taken in deposit slip
• Cash limit exceeded
• DD payable remaining outstanding for long periods
• Suspense Account and Sundry Deposit outstanding / awaiting reversal for long
• Cutting and erasing found in registers — strictly prohibited

B. Bai Murabaha / Bai Muajjal Lapses

• Extending cash to client directly instead of goods purchase
• Adjusting old investment by extending new investment
• Cash memo in client's name instead of bank's name
• No similarity between cash memo amount and actual disbursement
• Client takes goods from seller directly — not routed through bank
• Agreement remains blank and undated

C. Bai Salam Lapses

• Profit charged instantly when price paid — not in proper order
• Bank officials do not receive goods and deliver to client as bank's agent
• No sales agent agreement signed with client
• No mention of goods particulars, delivery place, quantity, quality, date and buying price
• Rebate given if export value realized earlier than due date
• Agreement blank and undated

D. HPSM Lapses

• Rent charged in gestation period
• No record of delivery of goods
• Agreement remains blank and undated

E. Musharaka Lapses

• No reflection of client's part in investment documents
• No similarity of equity in document vs actual
• Estimate accounts used instead of actual business accounts
• No survey of buying and selling of goods by bank officials

F. Mudaraba Lapses

• No transparency in accounts of the business
• Submission of accounts based on inference, not actuals
• Interference by Sahib-al-Mal in business operations

G. Istisna Lapses

• Existence of goods at time of contract (goods must NOT yet exist in Istisna)
• Absence of written deed / agreement

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9. ⭐ Master Quick Recall & Mnemonic Summary — Exam Ready

All information updated as of March 2026.

Topic	Key Fact	🧠 Mnemonic
OIC Definition	1978, Dakar, Senegal — bans interest via Statutes, Rules, Procedures	SRP — "Shariah Runs Properly"
BB Definition	BB Guidelines for Islamic Banking 2009 — avoids receiving & paying interest at all levels	BB 2009 — "Bangladesh Bank Defined"
First Islamic Bank	Mitgamar Savings Bank, Egypt — 1963 — Dr. Ahmed Al Naggar	NEg 63 — Naggar in Egypt, 1963
First Official IB	Tabung Haji, Malaysia — 1963	T = Two (same year, 1963)
IDB Established	20 October 1975	"75 is IDB alive"
MBPLC Vision	Would make finest corporate citizen	FCC — Finest Corporate Citizen
MBPLC Mission	Most caring, equitable growth, diversified resources, healthy & profitable	CEDH — Caring, Equitable, Diversified, Healthy
Current MD & CEO ✔	Md. Mati Ul Hasan (w.e.f. 30 Nov 2024)	Mati = Nov 2024
Network ✔ (Jan 2026)	153 Branches | 48 Sub-Branches | 45 IBW | 197 ATMs | 188 Agent Banking | 22 AD | 2 OBU	"One-Five-Three stand tall, Four-Eight serve them all, Forty-Five windows shine, One-Nine-Seven in a line, One-Eight-Eight at your door, Twenty-Two ADs, Two OBUs more!"
MBPLC Slogan	বাংলার ব্যাংক	Banglar Bank
Motto	Efficiency is our strength	E = S
7 Core Values	Customer, Innovation, Ethics, Caring HR, Commitment, Social, Shareholders	CIECSS — "Can I Ever Count Colleagues' Sincere Support?"
7 Ethics	Responsible, Ethical, Sustainable, Transparent, Friendly, Compliant, Confidential	REST FCC
MSA Profit Rate	3.00% (Current Provisional Rate)	MSA = 3%
MTDR-12M Rate	9.50% (below Tk.1 cr) / 9.75% (Tk.1 cr & above)	12M MTDR ≈ 9.5–9.75%
Profit Method	Weightage-based system as per Bangladesh Bank guidelines	Weightage System
Riba Types (2)	Al-Nasia (time/loan) | Al-Fadl (goods)	N=Notes | F=Food
Suras on Riba (4)	Ar-Rum 39 | An-Nisa 160–161 | Al-Imran 130 | Al-Baqarah 275–281	RNIB — "Riba Noted In the Book"
Profit vs Interest	Profit = Uncertain + Risk + Halal | Interest = Certain + No Risk + Haram	URH vs CNH
7 Demerits of Interest	Parsimony, Grievances, Social, Julm, Inflation, Idle, Less investment	PGS JIL — "Poor Greed Spreads, Justice Is Lost"
Shariah Lapse Modes (6)	Murabaha | Salam | HPSM | Musharaka | Mudaraba | Istisna	MS HMS MI — "My Sister Has Many Mutual Investments"

Prepared by: bankessentials.blogspot.com  |  Updated: March 2026