PER and IRR Policy

Profit Equalization Reserve (PER) & Investment Risk Reserve (IRR) Policy


  • Profit Equalization Reserve (PER) Policy

    PER is a reserve to accommodate the pool’s abnormal yield fluctuations.

    1. PER will be maintained at the Bank’s discretion and the accumulated balance not to exceed 30 percent of Islamic Banking Group’s or as per the State Bank of Pakistan’s directives from time to time.
    2. Creation and movement of Profit Equalization up to a specific limit will be approved by the designated officials of the Bank dully authorised by ALCO, any amount over and above the specific limit is to be approved by ALCO.
    3. The Periodic contribution into the reserve not to exceed 2 percent of Net Income.
    4. 50 Percent of the reserve’s balance will be disclosed as reserve whereas remaining 50 percent will be disclosed as liability in the Bank’s balance sheet.
    5. Reserve’s funds will be invested in SLR eligible securities like Sukuk and other similar instruments etc. and profits/return earned from such investments will also be credited into the PER account whereas Mudarib/Bank’s Share should not exceed 10% from the such profit/return.
    6. The Bank may fully or partially utilize the amounts of reserve during a period when the pool’s profit is less than the expected returns for depositors.


  • Investment Risk Reserve (IRR) Policy

    IRR is a reserve to accommodate the credit and market risk of financing and investments such as unusually large write offs and/or significant losses on sale of the pool’s investments or as per the Bank’s policy / State Bank of Pakistan’s directives from time to time.

    1. IRR will be maintained at the Bank’s discretion or as per the State Bank of Pakistan’s directives from time to time.
    2. Creation and movement of Investment Risk Reserves up to a specific limit will be approved by the designated officials of the Bank dully authorised by ALCO, any amount over and above the specific limit is to be approved by ALCO.
    3. Reserve’s balance will be disclosed as liability in the Bank’s balance sheet.
    4. Reserve’s funds will be invested in SLR eligible securities like Sukuk and other similar instruments etc. and profits/return earned from such investments will also be credited into the IRR account whereas Mudarib/Bank’s share should not exceed 10% from the such profit/return. In case of losses, if any, incurred by the pool will be covered from the balance available in reserve account.
    5. Contribution will not exceed 1 percent of the profit available for distribution amongst the pool’s depositors after deduction of Mudarib share in every profit period or as per State Bank of Pakistan’s directives issued from time to time.