Seyed Abbas Mousavian, a member of the Sharia Council of the Central Bank and a board member of the Iranian Association of Islamic Finance, said the issue raised at the recent session of the Central Bank's Sharia Council was regarding the difference of opinion for calculating obligation that arise between the banking system and the National Organization for Civil Registration and sometimes in the Judiciary Power during the execution of the sentence.

Referring to the issue of obligation from the point of view of the Monetary and Credit Council, he stated in the resolution of the Monetary and Credit Council, which was approved by the sharia scholars of the Guardian Council, it is stated the recipient facilities undertakes that if he does not pay his debt to the bank, he will pay a certain percentage of the debt balance to the bank as obligation.

The purpose of the principal balance of the debt is not only the principal of the facility but also the principal of the facility plus return.

Obligation from the viewpoint of the Guardian Council’s sharia scholars

The vice-chairman of the Sharia Committee of the Securities and Exchange Organization mentioned the reason is that the debt of the recipient facilities is not only the principal of the facility, but also owes the return; therefore, the sharia scholars of the Guardian Council do not want to say that the obligation will be considered only for the amount received. Obligation for a debtor who does not pay on time is also included.

The purpose of the Guardian Council about the principal of the debt is the amount of facilities provided to the applicant plus the considered profit on those facilities.

Of course, if the recipient facilities was one year late in repaying them and the obligation was received from him, another obligation can no longer be taken for that obligation, because the obligation is no longer part of the principal of the debt, but the amount of the facility and the profit accrued is part of the principal of the debt and if it is delayed each year, the obligation will accrue to a combination of facilities plus profit.

Profit rate status in exchange and partnership agreements

Mousavian stressed the second point that was raised in the Sharia Council in this regard was the profit in some facilities, such as exchange agreements, which is determined at the very beginning of the contract, that is in the facilities given to the customer and the profit for those facilities. The amount of the debt is composed of the principal of the facility plus the profit that is considered at the very beginning of the contract.

But in partnership agreements, because profit is expected and gained at maturity, if the recipient facilities uses partnership agreements and does not pay his debt after maturity, then it is assumed that he has taken the principal of the facility and the profit has been realized and the recipient facilities has not come to pay the principal of the partnership facility and the realized profit to the bank.

Therefore, in this case, the purpose of the obligation is the obligation on the principle of partnership facilities plus the realized profit at the end of the maturity. This issue was approved in the Sharia Council of the Central Bank.