SBP challenges Shariat Court’s order to eradicate interest on loans in SC

FSC had ordered banks to declare money deposits ‘interest-free’ from June 1
<p>The Supreme Court of Pakistan. PHOTO: AFP/FILE</p>

The Supreme Court of Pakistan. PHOTO: AFP/FILE

The State Bank of Pakistan (SBP) has sought ‘guidance’ from the Shariat Appelate Bench of the Supreme Court over a verdict of the Federal Shariah Court (FSC) for the abolishment of ‘Riba’ (interest) in the country, SAMAA TV reported on Saturday.

On April 28, the Federal Shariat Court had ordered the government to eradicate interest on loans by 2027 in a 19-year-old case.

The appeal, filed by Salman Akram, has nominated the Ministry of Law and Justice, Ministry of Finance, Banking Council of Pakistan, and Attorney General of Pakistan as the respondents.

The appeal maintains that the SBP is the “prime custodian and regulator of the financial and monetary framework of the Islamic Republic of Pakistan” and “is deeply committed to ensuring compliance with the injunctions of Islam, in particular those pertaining to Riba.”

It added that the the central bank has to protect the stability and security of the financial sector of the country, noting that they have to function as part of the global financial system.

The central bank contended that the FSC had not taken due consideration of the remand order passed by the apex court while issuing a judgment on interest.

The central bank claimed it is among the few regulators which have successfully developed and implemented comprehensive legal, regulatory and Shariah Governance frameworks.

Moreover, it said that In addition, SBP has also been taking measures to bring the legal and regulatory infrastructure in compliance with Shariah principles.

According to the SBP, currently 22 Islamic Banking Institutions including five full- fledged Islamic banks and 17 conventional banks having standalone Islamic banking branches are operational across the country.

Islamic banking industry, it stated, now accounts for 19.4% of the country’s overall banking system in terms of assets, it said.

The SBP has prayed to the SC to order amendments to FSC’s April 28 verdict in the light of issues raised in the appeal.

The full bench of the FSC comprising Chief Justice Muhammad Noor Meskanzai, Justice Dr. Syed Muhammad Anwer, and Justice Khadim Hussain M. Shaikh, in exercise of power under Article 203-D of the Constitution of the Islamic Republic of Pakistan had announced the reserved FSC judgment on Riba.

The FSC had directed the federal government to expedite efforts to remove the word interest from all legislation, saying that any federal or provincial legislation carrying the word “interest” is against Shairat.

It had directed the government to start implementing the order from June 1 by declaring the money deposited in banks as “interest-free”.

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