Banks cannot be closed down: FSC CJ

ISLAMABAD: The Federal Shariat Court observed on Friday that the government and financial institutions (banks) should develop consensus over interest-free transactions.

A three-member Federal Shariat bench, headed by Chief Justice Muhammad Noor Meskanzai and comprising Justice Dr Syed Muhammad Anwar and Justice Khadim Hussain M Sheikh, heard petitions regarding the interest system on Friday.

The court adjourned the hearing till February 1 after Attorney General sought an adjournment in the case but the bench directed the AG to conclude his arguments on the next hearing. During the course of hearing, a representative from Tanzeem-e-Islami raised objections to the two parallel banking systems in the country. Chief Justice Federal Shariat Court, however, in response to the objection, remarked that the court could not shut down banks, adding the Islamic banking transactions can be established only through legislation.

Justice Dr Syed Muhammad Anwar observed that Islamic banking system cannot be established overnight adding that according to government, work was in progress on this. The judge further said that Australia has introduced interest-free banking system.

Meanwhile, the State Bank submitted before the court, its report spread over five volumes pertaining to steps taken so far for the Islamic banking system. Salman Akram Raja, counsel for the State Bank and the United Bank, while arguing before the court, submitted that the State Bank is quite serious about establishing the Islamic banking system and had worked extensively than many other Islamic countries.

The counsel, however, submitted that it cannot be established overnight but will take time adding that being a state entity, the State Bank is in contact with the world. He informed the court that during 2003, the State Bank established an Islamic Banking Department and prepared a strategic plan for interest-free transactions. Similarly, he submitted that amendments have been made in Banking Courts Ordinance 1962 and other laws as well for Islamic banking. "However, despite these measures, taken by the government and the State Bank, establishment of Islamic banking system is not an easy task due to some difficulties,” Salman Akram Raja told the court.

Chief Justice Federal Shariat Court, however, observed that the task could become easy if the government and financial institutions develop consensus over it. The chief justice observed that if government was seriously working for the elimination of interest then there should be no hurdles. A representative of Attorney General’s office prayed the court to fix the hearing after February 15 but the Chief Justice observed that they could not give long adjournments.