'Seismic shift' to take interest out of banking sector.

ISLAMABAD -- After challenging the Federal Shariat Court's (FSC) decision on the interest-free banking system some four months ago, the government had a major change of heart on Wednesday, saying that it now wants to rid the country of Riba as soon as possible.In a pre-recorded video message, Finance Minister Ishaq Dar announced that the State Bank of Pakistan (SBP) and the National Bank of Pakistan (NBP) would be immediately withdrawing appeals against an April decision of the FSC in which it gave the government five years to eliminate Riba (interest-based) banking from the country.'With the permission of Prime Minister Shehbaz Sharif and consultations with the SBP governor, I am announcing a decision of the PDM [Pakistan Democratic Movement] government that both the SBP and NBP would withdraw their appeals filed in the Supreme Court of Pakistan against the FSC order within the next few days,' Mr Dar said.He said the FSC had in the recent past given a judgement to transform the country's banking system and end the interest-based financial system within five years as required by the Holy Quran and Sunnah.Interestingly, Mr Dar's preAdecessor, Miftah Ismail, annAounced in June that the NBP had been directed to withdraw its appeal in the apex court filed against the FSC judgement, but no progress took place on the ground.In December 1991, the Federal Shariat Court declared interest-based banking in all forms and manifestations against the teachings of Islam and set a deadline for its elimination in the country by June 1992.The order, however, could not be implemented as the then government went into appeal against the decision in the Supreme Court on several grounds, including the tight schedule to transform the whole financial system and risks to the banking system.The matter lingered on one pretext or the other as the Supreme Court initially upheld the FSC judgement of 1991 and then suspended its implementation and then referred it back for review to the FSC, where it remained for more than two decades.On April 28 this year, the FSC noted that enough time had lapsed since 1991 to devAelop the country's banking system and the national ecoAnAomy into an equitable, asset-based, risk-sharing and interest-free system. It declaAred the prohibition of Riba in all forms and manifestations and directed the government in a conclusive judgment to eliminate interest...