Kuala Lumpur (25th May 2015): The Islamic Financial Services Act (IFSA) 2013 allows greater flexibility for Islamic banks to structure products, including deposit and investment accounts.
Depositors are now given the option to choose between investment and deposit accounts. Customers, who opt for investment accounts which allow them to invest in the Islamic banks’ portfolio of assets, could potentially enjoy higher returns than deposit accounts.
The Association of Islamic Banking Institutions Malaysia’s (AIBIM) President, Dato’ Mohd Redza Shah Abdul Wahid said, “IFSA aims to encourage banks to diversify their product offerings, hence the Act requires us to clearly differentiate between investment and deposit accounts.
“This allows the banks to customise their products according to the customers’ profile and risk appetite. Those who are prepared to take higher investment risk could potentially earn higher returns”.
Just like any investment, the principal amount for investment accounts is not guaranteed. Since these accounts are not deemed as deposits under IFSA, the funds are not protected under the Perbadanan Insurans Deposit Malaysia (PIDM) scheme.
“The Islamic banks will conduct customer suitability assessments to ensure that customers choose investment accounts that commensurate with their risk appetite, financial profile and capacity. This is in line with the customer protection pillars under IFSA,” Redza added.
With this new product offering, existing Mudharabah account holders can opt for investment or deposit accounts. Islamic banks offering the investment account option have communicated the specific product features and benefits to their respective customers.
As such, customers are advised to inform their banks of their preferred option, be it investment or deposit accounts, by the deadline communicated by their respective banks. Otherwise, their accounts will be maintained as deposit accounts. The Islamic deposit accounts will continue to be guaranteed and covered by PIDM.
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