A financial scheme from 4 – 24 months under which our agricultural customers can get finance from Rs 5000 with upper limit as per regulations.
|Name of the product||NRSP Sala’m|
|Underlying Islamic mode||Sala’m|
|Type of product||Agriculture|
|Minimum and Maximum financing limit||Minimum Limit Rs. 5,000 Maximum Limit as per Prudential Regulations|
|Tenors (minimum and maximum)||Minimum 4 month, Maximum 24 months|
|Basis of pricing / return||Negotiated at the time of contract|
|Security/collateral Required||Cash Margin, Post-dated cheques, Demand Promissory Note|
|Other salient features/services||The product can be used for agriculture products|
Salam (Contract of Advance Payment Sale)
Definition of Salam
The Muslim Jurists (faqih) (may Allah have mercy on them) define the Salam as:
A contract according to which the price of a clearly defined item is paid in advance at the price of concluding the contract, and the sold item it to be received later.
Legitimacy of Salam
Ibn ‘Abbas (may Allah be pleased with him) says: “I testify that Allah has made lawful to us (Muslims) to pay in advance for the price of a thing to be delivered later after a specified term”. He then recited this above-mentioned verse”. (Source: Al-Hakim (3189) [2/342], Al-Bayhaqi (11081) [6/30] and ‘Abdur-Razzaq (14064) [8/5].)
When the Prophet (SAS) arrived at Medina and found its people paying in advance the price of fruits to be delivered later after a year, two or three, he said: ” Whoever pays in advance the price of a thing – (or “…of fruits…” according to another narration) – to be delivered later should pay it for a specified measure at specified weight for a specified period.” (Related by Al-Bukhari and Muslim).
The Modern Application of Salam to Islamic Banking Products
The Salam sale has the flexibility to cover the needs of various sectors of people such as farmers, industrialists, contractors, exporters or traders. It can be used to meet the capital requirements as well as to meet the cost of operations.
In NRSP we use Salam mostly to finance the agricultural operations;
- Where the Bank transact the farmer to fulfill the promise to deliver the commodity against full payment of price in advance.
- The bank then sale those commodity in market to create profit.