Is Keeping Savings in XAU (Gold-Indexed Currency) in a Bank Account Permissible?
Shafi'i Fiqh
Answered by Shaykh Muhammad Carr
Question
Is it permissible to keep savings in an XAU (gold-indexed) bank balance that is redeemable at any time only in local currency at the current gold rate, with no physical gold and no interest?
Answer
In the Name of Allah, the Most Merciful and Compassionate.
Thank you for your question.
May Allah reward you for ensuring that your transactions are Shari‘a-compliant. Allah Most High says,
“You may retain your principal—neither inflicting nor suffering harm.” [Quran, 2:279]
Bank accounts are typically structured as a loan contract. As such, you are lending the bank the money, and they will repay it on demand. A loan is an act of giving wealth to a borrower for their benefit, with the expectation of repayment. [Khatib, al-Mughni]
Loans should be repaid in the same generic type (jins) as borrowed initially, at their nominal value, except in cases of hyperinflation. Ibn Naqib states, “It is necessary to return the like thereof.” [Ibn Naqib, ‘Umdat al-Salik]
Contractually obligating the borrower to repay the equivalent value is considered indexing, which most scholars do not permit.
Scholars such as Rafiq al-Misri and Sultan Abu Ali M.A. Mannan permit it, while the vast majority do not [Mansuri, Islamic Law of Contracts and Business Transactions]. However, mitigating circumstances may justify adopting this view. In this regard, it is advisable to consult a qualified local scholar.
It is important to note that the above structure can, in principle, be re-engineered to comply with Shari’a requirements. However, this would necessitate fundamental changes to the underlying arrangement.
And Allah knows best.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani
Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefited from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.
In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.
