Q: Is it permissible to pay for a Gold Safekeeping Facility for fixed monthly fee (charged in proportion to the weight of Gold that is safeguarded)?
As outlined on the above site, this service also includes a facilty to borrow ’emergency cash’ secured against the safe kept gold. The bank has said that the ‘monthly fee’ charged is for “safekeeping of Gold jewellery” and not an increment on the money borrowed. Loan needs to be paid back before end of the ‘safekeeping period’ (upto 12 months).
A: There are two separate contracts here. One related to the safekeeping of the gold and a second related to an interest free loan. The monthly fee charged is lieu of the safekeeping of the gold under an ijara contract. This is a valid contract. There is no increment charged upon the loan. The only relation between the two separate contracts is that the gold that is being held for safekeeping by the bank is used as collateral to secure the interest free loan. If the borrower defaults on the loan the bank is able to recover its loan from the gold it is holding for safekeeping. Thus, the monthly fee is not riba.
However, if the loan was to be made conditional on the deposit of gold with the bank for which the bank will charge a monthly fee, then this conditionality is not permissible. The two contracts must be independent.
And Allah knows best.
Mufti Mohammed Zubair Butt