SBP, NBP to withdraw appeals against Shariat Court's order: Ishaq Dar

Minister for Finance and Revenue Ishaq Dar announced on Wednesday that the government has reached an understanding with the State Bank of Pakistan (SBP) and National Bank of Pakistan (NBP) to rescind their appeals against the Federal Shariat Court’s (FSC) order to implement Islamic banking system in Pakistan by 2027.

On April 28, 2022, the FSC had ruled that elimination of interest from the economic system was a religious and legal responsibility, ordering the government to end the interest-based banking system by the end of 2027.

The decision was made on petitions against Riba (usury) after the Supreme Court referred the case back to the court in 2002 following appeals against the decision of the FSC.

Federal Shariat Court declares interest-based banking as against Sharia

In a press conference on Wednesday, Dar stated the government has held discussions to implement the order of the FSC and steer Pakistan towards full-fledged Islamic banking.

“It will take time to revamp the banking system that has been in effect in the country for the past 75 years,” he stressed. “It cannot be shifted immediately.

"As a first step towards this aim, the government has motivated SBP and NBP to rescind the appeals lodged by them against FSC’s decision. The Institutions will work to implement interest free banking in Pakistan within the timeframe allotted by FSC."

While announcing the verdict in the long-pending case in April, Judge Syed Muhammad Anwar had emphasised that interest-free banking can be implemented all over the world. He did not agree with the federal government’s arguments highlighting the negative impacts of interest-free banking system.

He directed the government of Pakistan to make efforts to eliminate interest from the country’s banking system in the next five years.

Anwar further called for getting rid of interest in domestic and international transactions. “All regulations containing the word interest should be revisited because such laws are against Shariah,” he said.

The case was decided by a three-person bench after 19 years and 34 hearings. The court had earlier reserved the verdict of the case on April 12, 2022.

It is pertinent to mention that the Riba-free economy case was remanded by Shariat Appellate Bench of the Supreme Court of Pakistan in 2002.