Islamic banking and finance
Submitted to: Sir Abubakar Siddique Submitted by: Atia Farooq Roll no: 4918 MBA 21(A)

A sharia,h perspective of minimum account balance
Requirement in Islamic banking
Summary:
This article describe sharia’h point of view weather its allow to Islamic banking to charge fee, cut profit and reduce free services when depositor have amount less the minimum requirement of amount in saving account and in current account. Conventional banks fix the minimum amount of saving account. Banks fix this amount to recover it service expenses. Mean amount of the interest (return on investment) must sufficient to recover its services expense. When depositor amount less the minimum requirement and due to which banks service charges increase as compare to interest then bank charge fee, or stop giving profit on saving account and also reduce providing free services. Some banks also have the same conditions for current banks but mostly not have such restrictions on current account, because banks not give any profit o current account so easily provide those free services. When saving account have amount less then minimum requirement bank convert these account in to current account and pay no profit on it. Bank also reduces the free services to savings account holder so When balance turn into zero then bank close the account of depositor. All banks whether conventional or Islamic suffer loss due to balance less than the minimum requirement because theses amount for no use of banks and they suffer loss due to less return and high expense. Due to these reasons many mostly Islamic banks in Middle East, Malaysia and Pakistan also use same techniques as use conventional banks. They also charge fee or reduce services and also stop giving profit on saving account. Islamic banks make deposits in two forms 1) Qard_e_Hasana base of current account Musharakah, Mudarabah base of profit and loss sharing account. Current account is a form of deposit. It is demand deposit, and depositor gets no profit on it. Qarde_e_Hasana is a loan on which no extra benefit can get. This extra additional benefit known as riba and repayment of loan should be in same form. All Islamic financial institutions consider current account as Qard_e_Hasana mean take as loan so it is a demand deposit and depositor can withdraw their amount any time on demand. Islam also gives the concept of charity. If borrower not pay the amount on time then lender give him relaxation by extend time and if borrower not able to pay loan then it’s better the borrower give it as charity but if borrower is financially able to give but refuse to make payment then it’s unfairness and injustice then lender have the right suit against debtor. Creditor also can recover his loan amount by take his personal property. Islamic bank mostly depend on profit and loss sharing. These are deposits of banks on the Musharakah and Mudarabah basis. Musharakah is a partnership business in which all partners share the profit and loss on agreed ratio. In Islamic banking partnership is between depositor and bank. Mudarabah is a business contract in which one person invest money and other person provide services and skills. Bank act partner and investor in both business and share profit on agreed ratio and loss share according to their part of investment. In case Of Mudarabah only investor means just Rabb_ul_Mal suffer loss. In partnership business profit must share according to sharia’a rules and regulation mean profit percentage can fix but not fix the amount or percentage of investment. These all prohibited and void. Profit and loss decide when actual transaction done. These all Islamic transaction practice in Islamic banking now sharia.h introduces three practices according to Islamic rules and regulation according to which charge fee. Cut profit or reduction in services is prohibited. Musharakah and Mudarabah is a business contract if any party refuse to give profit the contract become void. Bank says actually they are not cut profit infact saving account shift into current account due to less balance of minimum requirement. Then sharia’h gives its explanation and said it is GHARAR. Gharar is the uncertainty, and risk in the business. In Islamic banking profit calculate on daily basis and average account balance is calculated at the end of month. In entire period depositor not know whether its deposit account on Qard_e_Hasna or on Musharaka and Mudarabah basis, because he don’t know his minimum amount of account till the end of month. This creates gharar for depositor because he is not sure about his amount. Uncertainty on a specific limit is allow but after that its become fraud, deceive and gharar so the minimum requirement by Islamic banks is the form of gharar. When a contract of Musharakah and Mudarabah made between two parties then it covert in to other contract mean in current account just by the agreement of both parties. Sharia’h also prohibited charging fee on below the minimum balance requirement. According to sharia;h just loss share by all partners in case of loss In business, this type of fee deduction not allow any profit and loss sharing business otherwise contract become void. Sharia’h also prohibited to charge fee on current account because it Qard_e_Hasna and it must repay in same amount if any amount deduct it consider as riba. Recently state bank of Pakistan take very good steps in this perspective. State bank said that mostly service provide to saving account free of charge, state bank also finish the minimum requirement of balance and bank pay profit irrespective of this condition. Two methods can be practiced to reduce the problem of below then minimum amount. Bank can give high weightages to that depositor who have the minimum required amount rather the cut profit or charge service fee. Bank give high weightages to high amount account as compare to low balance account but bank must give these weightages with the recommendation of sharia,h scholars not personally otherwise it equal to present activities. 2nd method is provide additional services the people who maintain minimum balance rather then reduce the basic services of people who cannot maintain minimum requirement. Islamic banks all practice must be according to the rules and regulation of the Islam. When we see the system of Islamic bank according to the point of view minimum amount requirement then we realized it need to re _check the system of Islamic banking and see whether its practice according to Islamic terms or not.