First:
We have previously discussed in past fātāwā (plural of fatwā) the ruling on bank interest in non-Muslim lands, and the summary of what we mentioned is as follows:
The majority of jurists from the Mālikīs, Shāfi῾īs, and most Ḥanbalīs hold that any increase on deposited money in banks is prohibited, considering it a loan to the bank. The rule they rely on is that every loan that brings about a benefit is ribā (usury).
Thus, according to them, that contract is invalid, and everything resulting from it is also invalid and considered consuming wealth unlawfully, regardless of whether this occurs in a Muslim-majority land or a non-Muslim-majority land.
The Ḥanafīs — except for Abū Yūsuf — and some Ḥanbalīs, including Ibn Taymiyyah the Elder and the Younger (as cited by Ibn al-Qayyim and Ibn Mufliḥ as a view within the Ḥanbalī school), opined that financial transactions are affected by the nature of the land (Muslim or non-Muslim).
Thus, what is prohibited in a Muslim-majority country may be permitted in a non-Muslim-majority one, such as exchanging one dirham for two dirhams.
According to this view, depositing money in banks with an incurred increase above the principal is permissible as long as the transaction occurs in a non-Muslim-majority land and is between a Muslim and a non-Muslim, whether an individual or an institution.
The money earned in this manner is not considered ribā according to them, even if the transaction takes the form of a loan, because the ruling changes depending on the land.
Some have argued that the bank deposit is not actually a loan, whether in Muslim-majority or non-Muslim-majority lands, because of the following differences:
 A loan is initiated at the request of the borrower, whereas a deposit is initiated at the request of the depositor; thus, the bank is not considered a borrower as it did not seek out the loan — it resembles wakālah (an agency relationship).
A loan has a set repayment term, during which the borrower cannot be demanded to repay early. Even some jurists allowed the borrower to pay less if he paid the loan back early based on the rule pay early to pay less. As for a deposit, it can be withdrawn by the depositor at any time in full, making it similar to ᾽amānah (a trust).
A borrower does not get paid for safekeeping the loaned amount, whereas a bank may charge fees for safekeeping deposits.
The essential nature of a loan is charitable — it is intended to ease the borrower’s hardship; it is a kindness — while the deposit contract combines elements of trust, agency, and muḍārabah (profit-and-loss-sharing).
Based on these differences in theory, they conclude that the ruling also differs. Thus, it indicates permissibility of having an increase when receiving the deposing back because the bank acts as an agent in investing the money, and any increase is considered profit from muḍārabah, which is originally lawful.
Some contemporary scholars have classified the bank deposit as a loan but have argued that the repayment should be based on value, not exact amount.
They reason that inflation negatively impacts the purchasing power of money.
The Qur᾽ān states: “But if you repent, you shall have your principal amounts.” [Al-Baqarah 2:279] — mentioning “principal amounts” and not merely “what you lent.”
Thus, the principal is calculated by adjusting for inflation, and any increase in the deposit amount would merely represent the difference caused by inflation.
Each group has its own evidence and analysis.
What we see and issue fatwā upon is:
Financial transactions differ between Muslim-majority lands and non-Muslim-majority lands.
The interest offered by banks in Western countries is not considered prohibited, and a Muslim is permitted to benefit from it in any way he deems fit — according to the last three views mentioned.
However, for those who hold to the first opinion, it is not permissible to take the interest — not for personal use, not for others, nor for fulfilling needs, paying fines or taxes — because the contract generating the interest is invalid in principle (according to the first opinion), and the resulting money is considered prohibited ribā, which can only be used out of necessity.
Obviously, paying taxes or fines does not qualify as a necessity.
Fatwā issued by Dr. Khālid Naṣr