"As one of Sri Lanka’s largest private banks it is our obligation to ensure that the services the unit provides are fully compliant with the tenets of the Sharia," managing director Amitha Gooneratne said in a statement.

M M A Mubarak, Fazil Farook and M M Murshid, from Sri Lanka's All Ceylon Jamiyyathul Ulama will be on the Sharia board.

Commercial Bank will offer deposit products such as ‘Mudaraba’ savings accounts and ‘Mudaraba' investment accounts’ and asset products such as ‘Murabaha,’ ‘Musharaka,’ ‘Diminishing Musharaka,’ and ‘Ijara’ leasing and import financing.

The bank said the products operate on the Islamic principle of both the bank and the customer sharing returns as well as risks.

Mudaraba, which is a form of profit sharing investment, is a partnership where one partner provides full capital while the other manages the business.

Any profit made using the funds is divisible between the customer and the Bank at a predetermined ratio agreed to by both parties.

Murabaha is the sale of goods by the Bank to customers at a cost plus profit where the selling price is decided at the time of the sale.

Murabaha can be used for local purchases or import of trading commodities and the customer is given a fixed tenor to settle the sales proceeds, the bank said.

Musharaka is a method of financing based on partnership, used for asset financing and export financing. Partners are entitled to a share in the profits that result from the project at a predetermined ratio which is mutually agreed upon at the time of entering into the contract.

Diminishing Musharaka is a partnership in which one partner (the customer) will purchase the Bank’s share in a fixed asset over a predetermined period and become the owner of the asset.

The ownership of it will be passed to the client upon successful completion of the agreed terms. This can be used for property purchase, housing purposes and project finance. Available for unregistered vehicles and equipment and machinery, Ijara is a contract where the lessor (Bank) who owns the asset transfers its usufruct to another person for an agreed period at an agreed rental.

The asset will be gifted to the customer when all lease rentals are met on time.

Import Financing involves providing letters of credit with financing on Islamic terms. This includes import Murabahas.