Category: Business Matters
Fatwa#: 41607
Asked Country: India

Answered Date: Feb 13,2019

Title: Charging interest due to law but deducting it at the end



I read in multiple fatwas of yours that its permissible to buy any product at no cost Emi. 

But a peculiar scenario has arisen in India. No bank is allowed to lend at no cost emi on sale of retail products as per RBI (central bank) guidelines.

So the banks which previously didn't mention interest in no cost Emi transactions are now mentioning interest in the calculations. But they are reducing an amount equal to interest as discount. In effect, interest component is mentioned just to comply with guidelines and banks aren't charging actual interest.

For example: if a product is priced at Rs 12,000/-,then 6 month no cost Emi means rs 2000 per month.

But Becuase of above guideline, the bank mentions Interest as under :

Suppose if the above was a normal interest based Emi and not a no cost Emi, then interest in total for the above transaction would be rs 500 at 13% p.a.

The bank calculates even in case of no cost Emi as under :

Product price 12000

Discount :500


Net price : 11500

Interest : 500 (to be spread over six months period and charged each month while paying emi) 

Meaning, a amount equal to interest is treated as discount upfront. 

Is this arrangement that the bank does, makes no cost Emi permissible for us. 


Note :the price of the product is same for no cost Emi transactions and cash transactions. Further, there is no processing fee for no cost Emi transactions. 


In the Name of Allaah, the Most Gracious, the Most Merciful.

As-salaamu ‘alaykum wa-rahmatullaahi wa-barakaatuh.

Brother in Islaam,

The question is not clear. Explain to us the exact sequence of events. Who exactly does the retail and does the bank come in the equation? Also, if the customer was to delay in payment, what will be the consequences? You may revert to us at


And Allaah Ta’aala Knows Best.

Muajul I. Chowdhury

Student, Darul Iftaa

Astoria, New York, USA


Checked and Approved by,

Mufti Ebrahim Desai.


DISCLAIMER - questions answers issues pertaining to Shar'ah. Thereafter, these questions and answers are placed for public view on for educational purposes. However, many of these answers are unique to a particular scenario and cannot be taken as a basis to establish a ruling in another situation or another environment. bears no responsibility with regards to these questions being used out of their intended context.
  • The Shar's ruling herein given is based specifically on the question posed and should be read in conjunction with the question.
  • bears no responsibility to any party who may or may not act on this answer and is being hereby exempted from loss or damage howsoever caused.
  • This answer may not be used as evidence in any Court of Law without prior written consent of
  • Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.