ISLAMABAD: The Supreme Court has formally dismissed as withdrawn two appeals after the State Bank of Pakistan and the National Bank of Pakistan withdrew their challenge against the last year’s verdict by the Federal Shariat Court to end interest-based banking in five years.

The matter was fixed for hearing before Chief Justice of Pakistan (CJP) Umar Ata Bandial in chambers the other day, with senior counsel Salman Akram Raja representing the central bank and Saad Hashim representing the NBP.

The lawyers told Justice Bandial that they had instructions to withdraw the appeals on behalf of the two government banks.

However, appeals moved by three private commercial banks — the MCB Bank, the United Bank Ltd and the Allied Bank Ltd. — were still pending.

The SBP and NBP appeals were withdrawn from the Supreme Court in line with the Nov 9 announcement by Finance Minister Ishaq Dar that the two banks would immediately withdraw appeals against the FSC’s verdict, directing the government to eliminate Riba-based banking from the country by Dec 31, 2027.

In the April 28 verdict, the Shariat court declared the prohibition of interest in all forms and manifestations as Islamic and in accordance with the Holy Quran and Sunnah.

The FSC said in its order that a five-year deadline was reasonable to convert Pakistan’s economy into an equitable, asset-based, risk-sharing and interest-free system.

Announced by a three-judge bench — consisting of FSC Chief Justice Muhammad Noor Meskanzai, Justice Dr Syed Muhammad Anwer and Justice Khadim Hussain M. Shaikh — the verdict had directed the federal as well as the provincial governments to complete necessary legislative amendments in the concerned laws and bring them into conformity with the injunctions of Islam.

It also ordered the government to adopt Shariah-compliant modes in future while borrowing from domestic or foreign sources.

The SBP, in its appeal, had contended that being the premier custodian and regulator of the financial and monetary framework of Pakistan, the bank was deeply committed to ensuring compliance with the injunctions of Islam while protecting the stability and security of Pakistan’s financial sector that functions as part of the global financial system.

However, while Islamic modes of finance were a growing area of interest for foreign providers of finance, the adoption of particular modes of finance with respect to any particular advance was not in the hands of the state of Pakistan and its various instrumentalities, the SBP said in the petition.

Published in Dawn, March 17th, 2023