NOTICE OF CONVERSION OF MUDARABAH AND WAKALAH TERM DEPOSIT ACCOUNTS INTO TERM DEPOSIT-i TAWARRUQ SPECIAL (TDT-i Special) ACCOUNTS IN COMPLIANCE WITH THE ISLAMIC FINANCIAL SERVICES ACT 2013 (‘IFSA 2013’)
Dear Special Investment Account (SIA) (Mudarabah Term Deposit) and Waheed-i (Wakalah Term Deposit) Account Holders,
Thank you for your support and loyalty to Bank Islam Malaysia Berhad (Bank Islam). Under IFSA 2013, one of the main highlights is to differentiate between Islamic Deposit Account and Islamic Investment Account effective from 30 June 2015. The objective is to promote financial stability, strengthen business conduct, and to foster consumer interest and protection.
Pursuant to the IFSA 2013, NOTICE IS HEREBY GIVEN that your existing Mudarabah and Wakalah term deposit account(s) which is currently classified as a deposit account(s) will have to be reclassified as investment account(s). However, Bank Islam determined to maintain the status of your existing Mudarabah and Wakalah term deposit account(s) under the Islamic Deposit, hence the said account(s) will be converted into TDT-i Special account(s) upon its next maturity. TDT-i Special account is a fixed rate term deposit account based on the Shariah concept of Tawarruq. Please visit our website www.bankislam.com.my to read the Terms and Conditions (“T&C”) of TDT-i Special account.
This conversion exercise will commence from 1st December 2014 upon each maturity of the existing Mudarabah and Wakalah term deposit account(s).
To facilitate the conversion into TDT-i Special account (s), Bank Islam shall perform the Tawarruq process of buying and selling of commodities on your behalf. WITH THIS NOTICE, you are hereby appointing and authorising Bank Islam as your agent for the purchase and sale of the commodities in accordance with the Terms and Conditions of TDT-i Special account and Bank Islam accepts the said appointment and authorisation.
All TDT-i Special account(s) will be eligible for Perbadanan Insurans Deposit Malaysia’s (PIDM) protection under PIDM’s Terms and Conditions and you may come to the branch to collect TDT-i Special certificate(s) for your safekeeping after the migration exercise.
Any term deposit account(s)/ SIA account(s)/ Waheed-i account(s) used as security (pledged/ charged/ assigned) for financing facility shall be excluded from this migration exercise.
Please do not hesitate to contact Corporate Money Market Sales Team at +0320901710 for any queries or you may visit our website www.bankislam.com.my for details. For further understanding, please read the attached Frequently Asked Questions (“FAQ”).
Bank Islam Malaysia Berhad
FREQUENTLY ASKED QUESTIONS (FAQs)
1. Why is the conversion necessary? The conversion exercise is necessary to be in compliance with the new regulatory landscape of IFSA which differentiates between Islamic Deposit Account and Islamic Investment Account. As such, to maintain the status of your SIA/Waheed-i as Islamic Deposit, the Bank will convert your existing SIA account(s)/Waheed-i account(s) into TDT-i Special account(s).
2. What is the difference between SIA/Waheed-i & TDT-i Special? SIA is based on the Shariah contract of Mudarabah which is an equity based contract. It prescribes you as the provider of capital and the Bank as the entrepreneur. Profit gained from the investment will be shared between both parties according to agreed Profit Sharing Ratio. Any loss suffered shall be borne by the capital provider unless it is caused by the negligence or misconduct of the Bank as entrepreneur.
Waheed-i is based on the Shariah contract of Wakalah where the customer has appointed the Bank as Wakil (Agent) to manage their funds with the objective of making a profit. Final return on investment will be paid to the Customer with the following conditions:
- If the actual return is above the expected return indicated at inception, the Bank will only pay the customer the expected return. Any excess profit will be retained by the Bank as a performance incentive.
- If the actual return is below the expected return indicated at inception, the Bank is obliged to pay the customer the actual return. However, the Bank may at its sole discretion pay customer the full amount of the expected return.
TDT-i Special is based on the Shariah concept of Tawarruq which involves sale-based contracts, in which the cost and profit shall be ascertained upfront. The underlying commodity used for this transaction should be Shariah compliant assets only.
3. What is Tawarruq? Tawarruq is widely used in Islamic banking involving commodity (i.e. subject matter of Tawarruq) transaction where the commodity is purchased on deferred payment basis by way of either Musawamah or Murabahah. The commodity is then sold for cash to a party other than the original seller.
4. What is Term Deposit-i Tawarruq- Special (TDT-i Special)? TDT-i Special is a fixed rate term deposit account based on the Shariah concept of Tawarruq. The profit rate/return of TDT-i Special is contracted upfront. In comparison, the profit rate/return of investment accounts is determined only upon maturity of the investment.
5. With this notification, what will the Bank do? The Bank shall proceed to convert your SIA/Waheed-i account into TDT-i Special account. In the process, you are deemed to have consented:
- To the conversion exercise, and
- To appoint and authorize Bank Islam as your agent for the purchase and sale of the commodities in accordance with the terms and conditions of TDT-i Special.
6. Will there be any fees or charges borne by me? No fees and charges will be borne by you under this conversion exercise.
7. Does this mean that SIA/Waheed-i will no longer be offered SIA & Waheed-i are still available but will be reclassified under Investment Account.
8. For the conversion, do I need to go to the branch? No, your SIA/Waheed-i account will be converted automatically upon its next maturity into TDT-i Special.
9. If I disagree with the conversion, what next You may go to our nearest branch and our dedicated Relationship Manager will assist to provide you with other alternative financial solutions.
10. Where can I read the TDT-i Special Terms and Conditions? Please visit our website www.bankislam.com.my to read the Terms and Conditions (“T&C”) of TDT-i Special.