Current Legal Issues
- BANKING AND FINANCIAL SERVICE
- (8) Internal and External Drafts
- (20) As a juridical term, a draft requires the transfer of the
debt from the transferor to the transferee. However, here it is used
in a wider sense.
Hereunder are specimens of bankers drafts:
- If a bank issues a draft because of which a person who has
deposited money in the bank receives his money at another place, the
bank may charge commission in return for assuming such a role.
Apparently, it is permissible for the bank to charge such a
commission. This is because the bank has a right to refrain from
accepting a settlement of its debit if it was not at the place of
It is, therefore, permissible for the bank to charge commission for
forgoing its right and accepting the settlement of the debt at
- The bank issues a draft in favour of a person that entitles him to
cash a particular sum from another internal or external bank. This
amounts to loan because the person has no account with the bank.
The bank can charge a certain sum of money by way of commission in
return for the service.
Apparently, it is permissible for the bank to charge such commission
for issuing the draft. This being so on the assumption that taking
is for acting as agent for the other bank in lending the bearer of
the draft the sum of money specified in it; the money paid shall be
debited to the account of the first bank held with it. It is not
considered as taking the ji'aala in return for being agent in
lending, to be haraam.
That is, the obligation to pay the ji'aala is not linked to
the lending process per se, rather for acting as agent in it.
There is, therefor, no harm in that.
Moreover, if the amount specified in the draft was in foreign
currency, this entitles the bank to a right. That is, since the
debtor owes the bank the amount in foreign currency, it has the
right to make him pay back the debt in kind.
If the bank foregoes this right and accepted settlement of the debt
in national currency, it is permissible for it to charge some of it
in exchange for choosing to forfeit its right. It also can exchange
it for the local currency plus the charge.
- A person pays a bank a certain amount of money, say in Najaf and
orders a draft for an equivalent amount drawn on another bank in
Baghdad or abroad, say Lebanon or Syria. The bank charges commission
in return for the service rendered.
This could take two forms:
- The person can sell a certain amount of national currency to
the bank for an amount of foreign currency equivalent to the
original amount plus the commission.
There is no harm in it as has been discussed in similar case
- The bank lends the customer a certain amount of money, then
makes it conditional that the borrower pays the bank commission
for accepting to transfer the loan [debt] to another person to
become the [new] debtor, and settling it in another country.
This is usury.
This being so because it amounts to making the extra payment
part of the loan [when repaying it], though it was for the
transaction of transfer and settlement of the debt..
Of course, such a transaction could be entered into without prior
condition attached. One could take a loan from the bank, then request it
be transferred to another bank to cash it there.
If the bank asks for a charge for accepting to do the service, it is
This is because the bank has the right to refuse the borrower's request
to transfer the debt to another person to become the [new] debtor and
settle it in another country.
This, however, does not fall under what the lender charges for
handling the loan and allowing the borrower to delay repayment of the
debt, which is usury. Rather, the bank's charges are for the bank
accepting to transfer the debt to another person to become the [new]
debtor, and settling it in another place.
There is no harm in this.
- (21) The bank draft may become two drafts.
The debtor may refer the creditor to the bank to issue a cheque in
his favour. The bank then transfers the amount to one of its branches or
to another bank in the country of the creditor so that he may receive it
there. This being so because:
- (i) The draft of the debtor is a credit on the bank. Thus, the
bank becomes indebted to the creditor.
- (ii) The draft of the bank is a credit on its branch or another
bank in the country of the creditor.
The role of the bank in the draft in (i) and (ii) is accepting the
draft and issuing it respectively.
Both the drafts are in order from an Islamic shari'a
However, if the draft of a bank issued to a branch representing the same
entity, it cannot be said that it be a draft in a juridical sense. This
is because [the process of] transfer of the debt from one person to
another is absent. It is merely entertaining the request of the bank by
its agent [branch] in another place to settle its debt in that place.
Nevertheless, the bank can charge commission for rendering such a
service, including its accepting a draft of any of its account-holders
who have a credit balance with the bank. This being so because it is
considered as a draft on the debtor.
The preferred answer (walmukhtar) is that it cannot be
activated without the acceptance of the party it is transferred to .It
may charge commission for the service.
- (22) Besides the banks, the above-mentioned rules, procedures
and their juridical implications could also be followed by common
That is, if a person gives some money to another person and asks him
to make a pay order in favour of another person, either in the same
country or some other country, there is no harm if the person accepting
the pay order charges some fee for this service. Similarly, if a person
takes some money from another person and gives him a pay order on a
third person to realise the amount from him, the person in whose name
the pay order was given can claim a fee from the person who gave the pay
- (23) In considering the discussion mentioned above, it makes no
difference as to whether or not the person, on whom the pay order is
given, is a debtor as long as there is a balance in the case of the
first one, and no balance in the case of the second.