BANKING OPERATIONS AND PRACTICES

KOLEJ PROFESIONAL MARA BANDAR MELAKA
GROUP ASSIGNMENT
SESSION 1/2021

Course Details : FIN 3513
Course Code : BANKING OPERATION AND PRACTICES
Course Name : DIPLOMA IN ISLAMIC BANKING AND FINANCE
Program : SOURCES OF FUND AND USES OF FUND
Topic : SESI 1/2021
Semester : PUAN NOOR AISYAH BINTI OTHMAN
Lecturer’s Name

Assignment Details : 26 APRIL 2021
Submission Date

Student’s Details

NAME ID NUMBER
AKMAL AMZAR BIN ABDUL RAHMAN BMF19-06-049
NUR FADZILAH BINTI SOBRI BMF19-06-002
NATASYA IMANI BINTI ANUAR BMF19-06-008
DAHLIA HANNANI BINTI MOHAMAD NASIR BMF19-06-004

TABLE OF CONTENTS

CONTENTS PAGES
Acknowledgement 2
Introduction of the Assignment 3
Content
References 4-14
Appendix 15
16-25

1

ACKNOWLEDGEMENT
The success and final outcome of this assignment required a lot of patience and
guidance in between the group members and all of our classmates. We were and will always
be grateful by having a very thoughtful lecturer, Madam Noor Aisyah binti Othman that has
been guiding us from the very first day of lecture. Thank you so much for the opportunity to
do this wholesome and super informative assignment.
We are also very grateful as we managed to complete this assignment within the time
given by Madam Aisyah binti Othman. This assignment would not turn out the best if it’s not
for the hard works shown by the group members.
We also had learned so much through this assignment and gets to picture more in
detail on the banking operations. Also, we get to go into depth in the difference of the Islamic
and conventional loans. This assignment would be very helpful for us students who will be
working in the banking sector in the future.

2

INTRODUCTION

In Chapter 3 we have learnt about the sources of funds used to generate funding for
customers in today's Islamic Banking activities of deposit funds and investment funds. The
deposit funds shall be used for saving or security purposes and shall ensure reimbursement
of the balance deposited, while the investment funds shall be invested without promise or
return of the principal. Other than that, in Chapter 4 we also have learnt about the uses of
funds that included retail finance and corporate finance the two major industries.

For this assignment, we choose to do a research to find the differences between
current account for conventional bank and Islamic bank. We also do a research about the
differences of automobile financing for both of bank that we choose. For conventional bank,
our group decided to choose RHB Bank and for Islamic bank is Hong Leong Islamic Bank.

Current deposit account is a form of demand deposits that offer users safe keeping of
their cash deposits and the choice to be paid in full upon demand. Current accounts deposit
facilities are usually offered to either individuals or companies. In Islamic banking the two
common structures of current deposits are qard and wadiah yad damanah.

Automobile financing is a popular product offered by Islamic Financial Institutions. The
most popular structure used by many IFIs is Al Ijarah Thumma Al Bay’ also known as AITAB
or simply known as the Islamic Hire Purchase. Other different terms that have been used are
Ijarah Wa Iqtina or Ijarah Muntahiyah Bittamlik means underlined by a leasing contract and
ends with the transfer the ownership to the customer after completion.

3

DIFFERENCES BETWEEN CURRENT ACCOUNT RHB AND HONG LEONG ISLAMIC
BANK.

NAME OF THE PRODUCT:

➢ HONG LEONG ISLAMIC BANK: HONG LEONG ISLAMIC BASIC CURRENT ACCOUNT-I

(ISLAMIC BANK)

➢ RHB BANK: RHB BASIC CURRENT ACCOUNT

(CONVENTIONAL BANK)

VS

1) ABOUT PRODUCT
• RHB Bank

The current deposit for the conventional bank is RHB Bank. RHB Bank provides three
current accounts for their customers which are Basic Current Account, RHB Smart Account,
and My1 Account. Eligibility for Basic Current Account is for individuals aged 18 and above.
Next is Basic Current Account-i can be open by people that are Malaysian citizens which means
residents and non-residents and permanent residents. Besides that, when they open the
account the minimum initial amount that they must deposit is RM 500. It was also applicable
to Small and Medium Enterprises (SMEs). Other than that, RHB also allowed joint accounts. It
will be protected by PIDM up to RM 250,000 for each depositor.

• Hong Leong Islamic Bank

Meanwhile, the current deposit account for Islamic Hong Leong Bank is divided into
two accounts which are Basic Current Account–i and Current Account–i. Eligibility for Basic
Current Account–i is it was open for Malaysian citizens and permanent residents only. It means
that not everyone can open an account if they're not Malaysian. Next is Basic Current Account-

4

i only can be open by people when they reach 18 years old and above. Besides that, when
they open the account the minimum initial amount that they must deposit is RM 500. It is also
applicable to Small and Medium Enterprises (SMEs). Shariah concept is also applicable at Basic
Current Account-i. Using this, HLISB is appointed as an agent to buy a product at a price equal
to the deposit level. Subsequently, they sell the goods at profit to HLISB and HLISB sells the
goods to a third party to obtain cash on Tawarruq grounds. Other than that, Islamic Deposit
will enjoy PIDM protection. It will be protected by PIDM up to RM 250,000 for each depositor.
It was the same with current account at RHB Bank. Next is the benefit of Basic Current
Account-i are it can be used by 24/7 digital banking services, waiver of debit card fees, and
used monthly instalment.

2) FEES & CHARGES

For fees & charges for both banks, it consists 4 similar fees and charge but for RHB
Bank, there 1 more extra charge.

• RHB Bank CHARGES
TYPES OF FEES/CHARGES

Service Charge RM5 undefined waived with monthly
average balance of RM1,000
ATM Card Issuance Fee RM8
MEPS Withdrawal Fee RM1
Early Closure Fee RM20
Dishonoured Cheque Fee RM150
Stop Payment Cheque Fee RM20

• Hong Leong Islamic Bank CHARGES
TYPES OF FEES/CHARGES
RM10 undefined waived with monthly
Service Charge average balance of RM1,000
RM7.50
Cheque Book Issuance Fee RM20
Early Closure Fee RM150
Dishonoured Cheque Fee RM10
Stop Payment Cheque Fee

5

3) FEATURES

There are three similar features between RHB Basic Current Account and Hong Leong
Islamic Basic Current Account-i which are they have online banking, PIDM protected, ATM
card and also provide mobile apps.

• RHB Bank RHBNow
Online Banking
PIDM Protected Up to RM250,000
Mobile Apps
Android
ATM Card iOS
Available

• Hong Leong Islamic Bank HongLeong Connect
Online Banking
PIDM Protected Up to RM250,000
Mobile Apps
Android
ATM Card iOS
Available

4) OPENING OF ACCOUNTS

These Terms and Conditions, as well as any other particular conditions that may be
applicable to current accounts with special features as set out in the Specific Terms. By
opening the Savings Account, you declare your commitment to follow these Terms and
Conditions.

• RHB Bank

Cheques and Cheque Books

1. You must at all times only use cheques supplied by us in relation to any of the RHB
current account.

2. You undertake to ensure the safety of all cheques at all times and to immediately lodge
a police report and to inform us of any loss of cheques in writing, failing which, we
shall not be held responsible for any losses arising from the lost cheques being dealt
with in any manner.

3. You must ensure that sufficient funds are maintained in your Account at all times for
payment of cheques issued.

6

4. We may refuse to honour cheques where the signature differs from the specimen
signature provided or cheques which are not drawn in a manner acceptable to us.

Overdrawing

1. No overdrawing is allowed unless you have made prior arrangement with us. Interest
on overdrawing for current account shall be calculated based on daily debit balances
at the rate determined by us and shall be debited to the current account monthly or
at such intervals as may be determined by us.

Bad cheques

2. We reserve the right not to honour any cheques issued by you if there are insufficient
funds in your account for payment of the cheque and if there are other technical errors.

3. We reserve the right to close or impose restrictions/conditions on all or any of your
Account with us if it is not conducted satisfactorily or has been listed with the
Dishonoured Cheques Information System (DCHEQS) or with any credit bureau or any
organisation or corporation whether or not such bureau, organisation or corporation
were/are established or approved by any government or regulatory authority or body.

• Hong Leong Islamic Bank

This is a deposit account based on the Shariah principle of Tawarruq.

- Any placement made under the Tawarruq CASA-i shall be in Ringgit Malaysia
(“RM”) and the minimum amount shall be as determined by HLISB from time to
time with prior notice.

Tenure

a) For Tawarruq CASA-i, the tenure (in days) is computed from Tenure Effective Date to
Tenure Expiry Date. Tenure effective date shall be:-
i. Day 1 after tenure expiry date; or
ii. On account opening date; or
iii. Where there is net deposit on any particular day.

b) Accrued profit that is credited on tenure expiry date is considered as settlement of
remaining Selling Price for sale transaction(s) that has been contracted earlier.

Security Deposit

7

• (SD) based on Shariah concept of Hamish Jiddiyah will be paid by HLISB to customer
to secure the undertaking made by HLISB to purchase commodity from customers

Commodity Trading (CT)
The Customer(s) shall enter into purchase and sale transactions for Shariah compliant
commodities for Net Deposit placement as follows: -

a) CT will be transacted on daily basis on Trading Day at a specified cut-off time
determined by HLISB.

b) As a general rule, CT shall be performed for EOD balance on Day 1 or any subsequent
net deposit on any single day,

c) CT will be traded at T+1 based on Net Deposit at T which forms the Customers’
purchase price. The Customers’ Purchase Price shall exclude any cheque floats.

CONCLUSION
To sum up everything that have been stated, from our research we can conclude that

there is similarity between conventional and Islamic bank for the current account. For
example, both banks need at least 18 years old and above to open current account. However,
Islamic bank is more shariah compliant and it doesn’t have ‘Riba’. Other than that, Hong Leong
Islamic Bank also allowed company to open current account but it must be according shariah
compliant.

8

DIFFERENCES AUTOMOBILE FINANCING BETWEEN HONG LEONG ISLAMIC BANK
AND RHB BANK

NAME OF THE PRODUCT:

➢ HONG LEONG ISLAMIC BANK: HONG LEONG ISLAMIC AUTO FINANCING-I
(ISLAMIC BANK) RHB HIRE PURCHASE

➢ RHB BANK:
(CONVENTIONAL BANK)

VS

1) ABOUT PRODUCT
• Hong Leong Islamic Bank

Hong Leong Islamic Auto Financing-I is an Islamic Hire Purchase facility that based
on Shariah Compliance of al-Ijarah Thumma Al-Bai’(AITAB). AITAB refers to a
leasing which ends with the sale of assets. Basically, when the clients accept the
financing, they will enter to an Islamic Hire Purchase agreement with the banks
where the banks will lease the vehicle to them based on agreement which an
agreed period and rental. Afterwards, we they will take the ownership of the
vehicles when the payment of final instalment.

• RHB Bank

RHB Hire Purchase is a financing that allows customer to purchase the vehicle by
monthly instalments which the interest will be calculate on a flat rate basis. This
contract is where the customers purely hiring the vehicle from bank and will get

9

the ownership when the full amount of the contract fully paid. Basically, the legal
ownership of the product belongs to the bank.

2) PROFIT RATES
• Hong Leong Islamic Bank

Local Foreign

Conditions New Car Used Car New Car Used Car

Maximum 9 years 9 years 9 years 9 years

Years

Margin of 90% 85% 90% 85%

Finance

Interest Rates 3.24% p.a. 3.78% p.a. 2.8% p.a. 3.78% p.a.

• RHB Bank

Local Foreign
New Car
Conditions New Car 9 years
90%
Maximum Years 9 years 2.8% p.a.

Margin of Finance 90%

Interest Rates 3.18% p.a.

3) FEES AND CHARGES
There a lot differences fee and charges that customers need to pay between Hong
Leong Islamic Bank and RHB Bank.

• Hong Leong Islamic Bank Charges
Types of fees/charges
from 2.8% p.a. to 3.24% p.a.,
Profit rates for new car depending on car brand,
borrowing amount, and period
Profit rates for used car from as low as 3.78% p.a.,
depending on car brand,
Stamp duty borrowing amount, and period
Late penalty fee RM10

1%p.a. in arrears (Ta'widh)

10

Early settlement fee None

Stamping of Hire Purchase-I Agreement RM10

Stamping of Hire Purchase-I Guarantee RM10 per guarantor
Agreement

• RHB Bank Charges
Types of fees/charges

Interest rates for new car from 2.8% p.a. to 3.18% p.a.,
Consent letter depending on car brand,
borrowing amount, and period
RM20

Stamp duty RM10

Late penalty fee 8% p.a on the outstanding
Early settlement fee balance
None

Hire Purchase Agreement RM10 per agreement

Discharge and release letter by the third party (as RM 30.00 per request

requested by the third party)

Road tax renewal RM 10.00 per transaction

Redemption statement (as requested by the third RM 30.00 per request

party)

Request for retrieval and copy of documents RM 22.00 per request

▪ Additional HP statement

▪ Issuance of letter of consent for transfer

of vehicle from East Malaysia to West

Malaysia and vice versa

▪ Issuance of letter of undertaking for

insurance/ takaful claim

▪ Audit confirmation per account

4) ELIGIBILITY
• Hong Leong Islamic Bank

11

For Hong Leong Islamic Auto-Financing-I, the individual age needed is from 21
years to 70 years old. Only Malaysians can apply this contract. Lastly, their
minimum annual income must be RM24,000.

• RHB Bank

For RHB Hire Purchase, the individual age needed is different with Hong Leong
Islamic Bank which the minimum age is 18 years old until 55 years old. Only
Malaysian who can apply this contract, same with Hong Leong Islamic Bank. Where
the minimum annual income is same like Hong Leong Islamic Bank, which is
RM24,000 per year.

5) DOCUMENT REQUIREMENTS
• Hong Leong Islamic Bank

Salaried Applicant:

▪ NRIC
▪ Driving License
▪ Latest 3-months salary slips
▪ Latest Borang BE (supported with tax payment receipt)
▪ Latest EPF statement with at least 6 months contribution
▪ Latest 3-months bank statement / saving passbook
▪ Letter of employment

Self-employed Applicant:

▪ NRIC
▪ Driving License
▪ Latest 6-months bank statements or savings passbook
▪ Latest Borang B (supported with tax payment receipt)
▪ Business Registration & Form D

• RHB Bank

Salaried applicants:

▪ Photocopy of identity card

12

▪ Photocopy of driving license
▪ Latest ONE (1) month salary slip; or
▪ Latest ONE (1) month credit bank statement; or
▪ Latest EPF statement

Government employed applicant:

▪ Photocopy of identity card
▪ Photocopy of driving license
▪ Latest one (1) month salary slip or
▪ Latest one (1) month crediting bank statement

Self-employed applicant:

▪ Business Registration Form A/B (for Sole Proprietor/Partnership); or
Current and valid professional practice certificate

▪ Latest six (6) months Personal or Company’s bank statement; or
▪ Latest Borang B/BE

Commission earner applicant:

▪ Latest six (6) month salary slip; and
▪ Latest six (6) months crediting bank statements; or
▪ Latest Borang BE (validated payment receipt of payment to LHDN)

6) IF FULLY SETTLE FINANCING BEFORE ITS MATURITY
• Hong Leong Islamic Bank

Hong Leong Islamic Auto Financing-I customer’s will be entitled a rebate. Which is
a refund of the mark-up charges for the unexpired tenure.

Calculation formula:
( + 1)

= × ( + 1)
R represents profit rebate
TC represents total amount profit payable over leasing period

13

n represents remaining leasing period expressed in months
N represents original leasing period expressed in months
• RHB Bank
RHB Hire Purchase customers are free to do early settle their hire purchase
accounts anytime.
7) INSURANCE/TAKAFUL COVERAGE
• Hong Leong Islamic Bank
Customers of Hong Leong Islamic Auto Financing-I are required to manage the
vehicle under a comprehensive takaful throughout the hiring period.
• RHB Bank
RHB Hire Purchase stated that the insurance is compulsory. RHB Bank have their
own insurer which is RHB Insurances Berhad. But if the customers are free if they
want to use other insurances services.

14

REFERENCES

- RHB Bank Basic Current Account [Online] available at: <
https://www.rhbbank.com.sg/personal/deposits/current-account/overview/index.html
> [Accessed 20 April 2021].
- Hong Leong Islamic Bank Basic current account [Online] available at: <
https://www.hlisb.com.my/en/personal-i/deposit-i/current-account/basic-current-account-
i.html > [Accessed 20 April 2021].
-RinggitPlus. 2021. Hong Leong Islamic Bank Basic Savings Account-i. [Online] Available at:
< https://ringgitplus.com/en/current-account/Hong-Leong-Islamic-Basic-Current-Account-
i.html?filter=Hong%20Leong%20Bank > [Accessed 20 April 2021].
- RinggitPlus. 2021. RHB Bank Basic Current Account. [Online] Available at: <
https://ringgitplus.com/en/current-account/RHB-Basic-Current-Account.html > [Accessed 20
April 2021].
- RinggitPlus. 2021. Best Car Loans. [online] Available at: < https://ringgitplus.com/en/car-
loan/ > [Accessed 20 Apr., 21].
- RinggitPlus. 2021. RHB Hire Purchase. [online] Available at: <
https://ringgitplus.com/en/car-loan/RHB-Hire-Purchase.html#foreign > [Accessed 20 Apr.,
21].
- RinggitPlus. 2021. Hong Leong Islamic Auto Financing-i. [online] Available at: <
https://ringgitplus.com/en/car-loan/Hong-Leong-Islamic-Auto-Financing-i.html#foreign >
[Accessed 20 Apr., 21].
- RHBGroup.com 2021. [online] Available at: <
https://www.rhbgroup.com/personal/loans/auto-financing/index.html > [Accessed 20 Apr.,
21].
- HLISB.com 2021. [online] Available at: < https://www.hlisb.com.my/en/personal-
i/consumer-financing-i/auto-financing-i.html > [Accessed 20 Apr., 21]

15

APPENDIX
16

17

18

19

20

21

22

23

24

25