In an expected move, the banking regulator along with four commercial banks—United Bank Limited, Allied Bank Limited, MCB Bank, and National Bank of Pakistan filed a review on the Riba Case in the Supreme Court of Pakistan (SC).
The banking regulator, in the appeal, said to the court that various financial matters were previously based on interest within the country hence it needed clarity from the apex court on certain discrepancies in the earlier judgment.
The petition also sought clarity from the apex court on the conversion of the Defence Certificate at a fixed profit rate which raised a huge amount under public debt.
The petition further reads that issuance of Sukuk or similar instruments in the required quantum is not available and its frequency is presently not practical. The assets available for the structuring of Sukuk instruments are also limited.
The petitioner sought the guidance of the Supreme Court of Pakistan with regards to the direction made by the Federal Shariat Court with respect to saving certificates and domestically raised public debt in general.
Individuals and businesses engaged in trade and finance internationally often own securities issued outside Pakistan that carry interest. Rule 9 (2) provides the mechanism for the receipt of such interest inside Pakistan. The same rule does not authorize the issuance of any interest-based instrument in Pakistan. The invalidity of Rule 9 requires the indulgence of the apex court and appropriate order, the petition reads.
These entities prayed that the judgment of the Federal Shariat Court may be kindly modified so as to address the issue respectively.
In April 2022, Federal Shariat Court ruled on the Riba-based economic system in the country ordering the government and the financial institutions to convert the economy from interest-based to Sharia-compliant in the next five years.
The Sharia court also declared that various financial mechanisms and products are against the teaching of Islam and demanded its immediate end in the banking and financial system of the country.
Experts in the financial sector said that the conversion of an economic system to Islam can be possible within the given timeframe depending upon the will of the political leadership and institutional administration.
Islamic banking had already been flourishing in Pakistan because of its acceptability among the masses. If plans are made with the relevant stakeholders, the conversion could take a little longer than five years but it will be possible in the future, they said.