Quora Answer: If the Bank Pays Me Interest on My Deposit, Would That be Haram?

بِسۡمِ ٱللهِ ٱلرَّحۡمَـٰنِ ٱلرَّحِيمِ 

The following is my answer to a Quora question: “According to shari’ah, if I deposit money in a bank as a small customer, and the bank pays me interest on my deposit, would that be haram?” 

Firstly, it is illogical to consider any and all forms of interest to be riba’.  Interest should be charged on a loan to cover infrastructure cost, and opportunity cost.  The bank buildings, the systems that track transactions, the security cost of holding deposits, all that staff - that is a cost.  We are not talking about the village money changer sitting at the corner of the bazaar somewhere in a distant oasis.  For there to be riba’, usury, there has to be an element of zhulm, oppression.  That means an interest rate far in excess of the principal such that the rate of increase far outstrips the borrower’s ability to pay, and other forms of predatory lending. 

Secondly, the bank takes in deposits, and then loans out those deposits to those who need it to overcome a temporary liquidity shortfall, or to cover the cost of a large purchase such as a house.  There is a cost involved in administering those transactions.  It is perfectly reasonable for the bank to charge an interest and a fee for that loan.  Since the bank has charged a fee on that loan, it is perfectly reasonable for them to give you interest on your deposit.  They are paying you for the privilege of using your funds.  How is this haram?  If the argument is that the bank may be doing something unethical, which may happen, we must also understand that it is a principal of shari’ah that we are not responsible for what we do not know.  In effect, we always assume the best, and proceed in good faith