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. 222 (6/23)

Banks’ Privileges to Current Account Customers from a Shariah Perspective

The Council of the International Islamic Fiqh Academy of the Organization of Islamic Cooperation, holding its 23rd session in al-Madinah al-Munawwarah, Kingdom of Saudi Arabia, on 19–23 Ṣafar 1440h (28 October – 1 November 2018),

Having examined the research papers submitted to the Academy concerning

Banks’ Privileges to Current Account Customers from a Shariah Perspective, Having listened to the in-depth discussions,

Resolves

First: Definition of a Current Account

It is a register of financial amounts deposited by the customer in the bank – Islamic or conventional – with the possibility to withdraw anytime through conventional means like cheques, bank transfers, and direct cash withdrawal. These deposited amounts are guaranteed and used by the bank for its interest as it wills and as regulated by laws.

Second: Shariah Characterization

After the Academy had reviewed Shariah characterizations of the current ac- count deposit such as its characterization as a real deposit which becomes guar- anteed when used by the depositee, or as a new independent contract, or as a contractual system composed of a number of contracts, the Academy concluded with the confirmation of its resolution no. 86 (3/9) on banking deposits in “the current account” in which it asserted that demand deposits accounts (current accounts), whether in Islamic banks or usury-based banks, are considered loans from the Fiqh perspective.

Third: Shariah Ruling on Banks Privileges to Current Account Customers (Demand Deposit Customers)

Definition of Banking Privileges

The meaning of banking privileges, in this context, are additional rights granted by the bank to current accounts users in order to bid and encourage them to create accounts or continue using them.

Banking privileges are, according to the nature of their benefits and the in- tended purposes, of two categories:

1. Privileges that benefit the Customer-only.
2. Privileges that benefit the two parties, bank and

First Category: Customer-only Privileges

Customer-only privileges can also be divided into two sub-categories: moral privileges and material privileges.

1. Moral privileges are benefits and services offered by the bank to the customer which do not include a financial premium added to the amount of the deposit such as service priority at the bank branches, providing customers with a periodic guiding brochure, periodic account statement, solvency certificate, international ATM cards, and so

The Shariah ruling on this kind of privileges is permissibility because they are not considered an interest-like financial addition that the borrower must pay for the lender in addition to the loan amount. It is, in fact, a form of facilitation offered by the borrower to the lender to recover his financial rights. Therefore, the original ruling of permissibility is carried over by virtue of istishab (legal continuity) due to the absence of prohibit- ing evidence.

2. Material privileges are additional items, benefits, and funds added to the deposit registered in the current account, and which are similar to material premiums for giving loans such as flight tickets, electric and electronic devices, and so forth.

The Shariah ruling on these material privileges is prohibition, whether they are conditional or unconditional, as long as they are caused by lend- ing and in regard to the loan’s size and duration; this makes it a kind of interest addition that the borrower is required to pay for the lender in addition to the amount of the loan.

However, if these material privileges are offered to every new custom-

er gained by the bank – whether in the current account or investment Muḍārabah account, or financing, etc. – they are then considered expens- es on advertisement and marketing and gaining customers and clients. In this case, these privileges are permissible in the application of the original permissibility, as long as they are not specific to lending and its amount and duration.

Second Category: Privileges for Both Parties – the bank and the customer

Privileges of the first sub-category are related to deposits and withdrawal trans- actions, whereas privileges of the second sub-category are unrelated to those transactions.

1. Privileges related to deposit and withdrawal transactions from the current account and the benefits going to both For example, chequebook and ATM card services.

Their Shariah ruling is permissibility because they are a form of aid by the borrower to the lender to facilitate getting back his financial rights, keeping in mind that these benefits of the loan are not only for the lender but are also for both the lender and borrower.

Moreover, it contains benefits for both parties without harming anyone, and Shariah does not reject unharmful privileges. This kind of privileges are neither explicitly forbidden in original Islamic texts nor fall within the context of explicit prohibition; therefore, it remains within the space of permissibility carried over from the original ruling.

2. Privileges, which benefit both parties but are not related to deposit and withdrawal transactions from the current account, such as granting some banking services at preferential fees or at lesser fees than those charged to other customers. This may relate to currency exchange rates, bank transfer fees, safe deposit boxes charges, credit letters fees, credit cards fees, letters of guarantee fees, and so forth. All of these privileges are pro- hibited because they constitute a loan bringing a benefit.

Indeed, Allāh is All-Knowing.