RESOLUTION No. (86/3/95)

"BANK DEPOSITS (Bank Accounts)"

Quote - The Council of the Islamic Fiqh Academy, convened in its Ninth
Session in Abu Dhabi, State of the United Arab Emirates, from 1 to 6 Dhul
Quida 1415 H (1 - 6 April, 1995);

Having examined the research papers forwarded to the Academy on the subject
of "Bank Deposits (Bank Accounts).

Having listened to the debate around the subject


First:Call deposits (current accounts) whether at Islamic banks or
interest-based banks, are considered as loans, from a Shari'a perspective,
since the bank taking delivery of these deposits is answerable for their
safety and bound Shari'a wise to returning them on call. The ruling
applicable to the loan is no way affected by the Bank's (the borrowers)
solvency or otherwise.
Second:Bank deposits are of two categories depending on the type of actual
banking operations:
a)Deposits for which an interest is paid, as in the case of interest-based
banks, being usury loans, are prohibited (haram) whether they are call
deposits (current accounts) or term deposits, notice-deposits, or savings
b)Deposits placed at banks which uphold in actual practice the rules of
Islamic Shari'a through an investment contract for a profit share, are
considered as Mudharaba (Sleeping partnership) capital, and hence are
subject to rules applicable to Mudharaba (Kiradh) in Islamic Fiqh, one of
which is the non-permissibility for the Mudharib (the Bank) to guarantee
the capital of the Mudharaba transaction.

Third:The guarantee for call deposits (current accounts) are imputable to
the debtors (the bank shareholders) as long as they have exclusive benefit
of the profits deriving from their investment. Depositors in investment
accounts are not called upon to be associated in guaranteeing such current
accounts, as they are associated neither in the borrowing nor in the
profits due.
Fourth: Mortgaging deposits, call (current accounts) and investment ones
alike is permissible, and mortgages against their amounts can only take
place through an arrangement precluding the account holder having access to
it for the whole mortgage period. 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investment account, in such a way that the guarantee is no longer
applicable in view of the conversion of the loan into a kiradh (Mudharaba,
i.e.sleeping partnership) and the profits arising from the accounted are
credited to the account holder so as to preclude the mortgage (Creditor)
from deriving benefits from any appreciation in the mortgage value.
Fifth:Retention on the accounts is permissible if the bank and the customer
have so agreed.
Sixth:The norm as to the legitimacy of dealings calls for trust and honesty
in disclosing data in a manner that would eliminate any ambiguity or
deception, and that would reflect reality and dovetail with the Shari'a
perspective. This is more of a duty for banks vis-a vis the accounts they
run in view of their activity being linked to their presumed credibility
and for the sake of avoiding to deceive the parties concerned.

Allah know best  Unquote

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