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Fatwa CenterShould Zakah be paid for bank deposits pledged as loan collateral?
Question
I have deposits in the banks that yield annual revenue. I borrowed a secured loan against these deposits to buy and furnish a house. I still pay the installments of these debts. Should I pay Zakaah for these deposits? If yes, what is the rate of Zakaah?
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His Slave and Messenger.
One should consider these deposits, if they are deposited in a usurious bank and the owner yields annual interests, this is considered forbidden usury. The owner should withdraw these deposits and repent to Allaah The Almighty. Moreover, he should pay Zakah for the original deposit at a rate of 2.5%. He should get rid of the yielded interests by spending them in fields of charity like paying them to the poor and the needy. If the deposits are in an Islamic bank, Zakah should be paid for the deposit and the profits at a rate of 2.5%. The fact that these deposits are pledged as loan collateral in the bank till the installments of the furniture are paid does not release him from the obligation of Zakah according to the opinion of the majority of scholars.
Allaah Knows best.
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