Ways of receiving interest

Question

Question: The Government of India and the provincial governments, in view of their needs, obtain loans from the public for a fixed term. On the sums of these loans interest is paid annually at a fixed rate. In addition, when receiving the loan the government takes a smaller amount and hands the lender a document for a larger amount. When the term of the loan ends, the lender receives in cash, besides the annual interest, the full amount recorded in the document.

Answer

This involves both interest and falsehood, and both of these things are impermissible in the Shariʿa. This transaction must by no means be entered into in order to obtain interest; such a transaction is not valid even with the mutual consent of both parties. If, however, someone is compelled to it by the grip of the law, he is excused.

Source: Fatawa Mahmudiyya

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