Relevant SAC Ruling on compounding profit on R&R:

1) Ruling of the SAC on Compounding Profit for R&R of Islamic Financing, SAC 214th Meeting dated 30 June 2021 – Source

This revised ruling is a continuation of the previous SAC ruling in its 30th special meeting dated 14 July 2020 (revised on 16 October 2020) which prohibits the practice of compounding profit in R&R of Islamic financing during COVID-19 pandemic period.

In this ruling, Islamic financial institutions (IFIs) shall ensure that in executing R&R financing:

  1. the new principal amount of the R&R financing shall be equivalent to the outstanding principal amount of the original facility, if there is no additional financing involved;
  2. the amount of accrued profit and late payment charges (where applicable) from the original financing can be added to the total new debt obligation, but this amount cannot be capitalised in the calculation of the new profit; and
  3. the prohibition is applicable to R&R financing with all customers (both musir and mu’sir).

2) The SAC Ruling on R&R of Islamic Financing Facility during COVID-19 Crisis, 30th SAC Special Meeting dated 14 July 2020 (revised on 16 October 2020) – Source

In implementing a restructuring and rescheduling:

  1. the new principal amount for the restructured and rescheduled facility shall be equivalent to the outstanding principal amount of the original facility, provided there is no additional financing;
  2. IFIs are allowed to charge a new profit rate on the new principal amount; and
  3. the amount of accrued profit and late payment charges (where applicable) on the existing financing can be added to the total new debt obligation, but this amount cannot be capitalised in the calculation of new profit.