Shar'i Status of Current Accounts and Clarification Regarding a State of Necessity
Question:
What is the Shar'i status of a bank’s current account in which the bank engages in interest-based transactions but does not pay any interest to the account holder? What is the preferred practice in this regard? What precautions do the scholars advise?
Answer by: Shaykh Abdul Wakeel Nasir ḥafiẓahullāh
The current banking systems are entirely based on interest, regardless of whether they are cloaked in Islamic terminology or bear altered names. In essence, they operate on an interest-based model. The matter can be clarified through the following points:
❖ All modern banks operate on an interest-based model, even if they do not offer interest on current accounts.
❖ Banks utilize the funds deposited in current accounts for interest-based profits, although they do not share this profit with the account holder.
❖ In today’s context, interaction with banks has practically become a necessity, and many essential needs cannot be fulfilled without a current account. Therefore, scholars have granted permission to use a current account under conditions of necessity.
❖ This permission is conditional upon it being a genuine necessity and provided that one refrains from any involvement in interest-based gains.
❖ If an Islamic alternative is available, it is preferable and better to adopt it.
❖ One should exercise caution in dealings with banks and restrict the use of current accounts strictly to what is necessary.
❖ Since Islamic alternatives within the current banking system are either limited or non-existent, the use of a current account is permissible under a state of necessity.
❖ It must be clearly understood that this allowance is confined to the scope of necessity and should not be adopted as a standard practice.
The use of a current account in the present banking system is allowed in cases of necessity, provided it is utilized strictly to fulfill essential needs. Nonetheless, it is more virtuous and preferable to seek and adopt Islamic alternatives wherever possible.
Question:
What is the Shar'i status of a bank’s current account in which the bank engages in interest-based transactions but does not pay any interest to the account holder? What is the preferred practice in this regard? What precautions do the scholars advise?
Answer by: Shaykh Abdul Wakeel Nasir ḥafiẓahullāh
The current banking systems are entirely based on interest, regardless of whether they are cloaked in Islamic terminology or bear altered names. In essence, they operate on an interest-based model. The matter can be clarified through the following points:
Banking System and Its Interest-Based Reality
❖ All modern banks operate on an interest-based model, even if they do not offer interest on current accounts.
❖ Banks utilize the funds deposited in current accounts for interest-based profits, although they do not share this profit with the account holder.
Permission in a State of Necessity
❖ In today’s context, interaction with banks has practically become a necessity, and many essential needs cannot be fulfilled without a current account. Therefore, scholars have granted permission to use a current account under conditions of necessity.
❖ This permission is conditional upon it being a genuine necessity and provided that one refrains from any involvement in interest-based gains.
Precautionary Measures
❖ If an Islamic alternative is available, it is preferable and better to adopt it.
❖ One should exercise caution in dealings with banks and restrict the use of current accounts strictly to what is necessary.
In the Absence of Alternatives
❖ Since Islamic alternatives within the current banking system are either limited or non-existent, the use of a current account is permissible under a state of necessity.
❖ It must be clearly understood that this allowance is confined to the scope of necessity and should not be adopted as a standard practice.
Conclusion
The use of a current account in the present banking system is allowed in cases of necessity, provided it is utilized strictly to fulfill essential needs. Nonetheless, it is more virtuous and preferable to seek and adopt Islamic alternatives wherever possible.
