Bank Deposits (Bank Accounts)
In the Name of Allāh,
the Entirely Merciful, the Especially Merciful
Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.
Resolution No. 86 (3/9) Bank Deposits (Bank Accounts)
The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 9th session in Abu Dhabi, United Arab Emirates, on 1–6 Dhū al-Qi’dah 1415h (1–6 April 1995),
Having examined the research papers submitted to the Academy concerning
Bank Deposits (Bank Accounts),
Having listened to the discussions on the subject,
First: Call deposits (current accounts) whether at Islamic banks or usu- ry-based banks, are considered as loans in the Shariah perspective, since the bank receiving these deposits is answerable for their safety and is Shariah-bound to returning them on call. The ruling applicable to the loan is not affected by the bank’s (borrower) solvency or otherwise.
Second: Bank deposits are of two categories depending on the type of actual banking operations:
- Deposits for which interest is paid, as in the case of usury-based banks, being usury loans, are prohibited whether they are call deposits (current accounts) or term deposits, notice deposits, or savings accounts.
- Deposits placed in banks, which are seriously Shariah-compliant through an investment contract for a profit share, are considered as Muḍārabah capital, and are therefore subject to the rulings applicable to Muḍārabah (Qirad), including the ineligibility for the Muḍārib (bank) to guarantee the capital of the Muḍārabah transaction.
Third: The guarantee for call deposits (current accounts) are attributable to the debtors (bank shareholders) as long as they have the exclusive benefit of the profits from their investment. Depositors in investment accounts are not called upon to participate in guaranteeing these current accounts, as they are associated neither in the borrowing nor in the profits due.
Fourth: Mortgaging of deposits, whether call accounts or investment ac-
counts, is permissible, and mortgaging against their amounts can only take place through an arrangement precluding the account holder from having access to it for the duration of the mortgage. In case the bank operating the current account is itself the mortgage, the amount must be transferred to an investment account in such a way that the guarantee is no longer applicable to the conversion of the loan into a Qirad (Muḍārabah) and the profits arising from the accounted are credited to the account holder so as to prevent the mortgagee (creditor) from benefiting from any increase in the mortgage value.
Fifth: Retention on the accounts is permissible if agreed upon by the bank and the customer.
Sixth: The principal norm as to the legitimacy of these transactions calls for trust and honesty in disclosing data in a manner that would eliminate ambigu- ity or deception, and that would reflect reality in a way consistent with Shariah provisions. Rather, this is more of a duty for banks to the accounts they man- age since their activities are based on their presumed credibility and to avoid misleading the involved parties.
Indeed, Allāh is All-Knowing.