Islamabad Capital Territory Prohibition of Interest of Private Loans Act, 2023

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THE ISLAMABAD CAPITAL TERRITORY PROHIBITION OF 
INTEREST ON PRIVATE LOANS ACT, 2023 
 
 
 
CONTENTS 
___________ 
 
 
1. Short title, extent and commencement 
2. Definitions 
3. Prohibition of Private Money Lending 
4. Punishment for Abetment 
5. Punishment for Molestation 
6. Complaint 
7. Liability to pay interest on debt to stand extinguished 
8. Offences to be tried by Court 
9. Cognizance of offences 
10. Adjustment of principal amount 
11. Recovery of sums 
12. Appeal 
13. Power to deposit in Court money due on loan 
14. Act to override other laws, etc. 
15. Indemnity 
16. Power to make rules 
17. Interpretation 
18. Repeal 
 

 
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THE ISLAMABAD CAPITAL TERRITORY PROHIBITION OF INTEREST 
ON PRIVATE LOANS ACT, 2023 
 
[9th January, 2023] 
 
ACT NO. III OF 2023 
An Act to prohibit the business and practices of private money-lending and advancing loans and 
transactions based on interest 
WHEREAS the injunctions of Islam as laid down in the Holy Qur’an and Sunnah have 
explicitly and unequivocally prohibited charging interest on loans and have declared war against those 
who do not abandon interest; 
AND WHEREAS the Constitution of the Islamic Republic of Pakistan obliges the State to take 
steps to enable the Muslims of Pakistan, individually and collectively, to order their lives in accordance 
with the fundamental principles and basic concepts of Islam and to provide facilities whereby they 
may be enabled to understand the meaning of life according to the Holy Qur’an and Sunnah; 
AND WHEREAS it is expedient to make a comprehensive Legislation on the subject for 
covering all the aspects of the mischief of private money lending and matters akin thereto; 
It is hereby enacted as follows:— 
1. Short title, extent and commencement.––(1) This Act may be called the Islamabad Capital 
Territory Prohibition of Interest on Private Loans Act, 2023. 
(2) It extends to the Islamabad Capital Territory.  
(3) It shall come into force at once. 
2. Definitions. — In this Act, unless there is anything repugnant in the subject or context— 
 
(a) “abetment” has the same meaning as assigned to it in section-107 of the Pakistan 
Penal Code, 1860 (Act XLV of 1860); 
 
(b) “borrower” or “debtor” means a person to whom a loan is advanced; 
 
(c) “Code” means the Code of Criminal Procedure, 1898 (Act No.V of 1898); 
 
(d) “financial institution” includes the State Bank of Pakistan, a commercial or 
investment bank, a leasing company, a modaraba or other concerns, so defined 
in terms of section 2 (a) of the Financial Institutions (Recovery of Finances) 
Ordinance, 2001 (Ordinance No. XLVI of 2001); 
 
(e) “Government” means the Government of Pakistan; 
 
(f) “Interest” includes any amount, big or small, over the principal, in a contract of 
loan or debt, regardless of whether the loan is taken for purpose, of consumption 
or for some production activity, whether the same is charged or sought to be 
 
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recovered specifically by way of interest or otherwise, or found so to be 
recoverable by a competent Court;  
 
(g) “Interest based transactions” include transactions,— 
 
(i) where differences in prices are exchanged without any intention of 
exchange of goods by the parties involved; or 
 
(ii) where sale is made on credit for higher price and repurchase of the 
same for lower price on cash, basis by the original owner in a given 
transaction; or 
 
(iii) where two prices are stipulated in the same deal that is to charge 
lower or discounted price for shorter period or given listed price for 
longer period by the buyer in a given transaction; 
 
(h) “loan or debt” means an advance whether of money or in kind, where the 
repayment is guaranteed on demand or after a specified period; 
 
(i) “Molest”— a person shall be deemed to molest another person if he,— 
 
(i) obstructs, or uses violence or criminal force to or criminally 
intimidates, such other person; 
 
(ii) interferes with any property owned or used by him or deprives him 
of, or hinders him in the use of any such property; and 
 
(iii) does any act calculated to intimidate the members of the family or 
such other person; 
 
(j) “money lender ” means a person, other than the Federal or  Provincial 
Government or a financial institution, who lends money on interest or deals in 
interest based transactions and includes any person appointed by him to be in -
charge of a branch office or branch offices or a liaison office or any other office 
by whatever name called, of his principal  place of business and a pawn broker 
who carries on the business, of taking goods and chattels In pawn or pledge for 
a loan, offering payday loans, small personal loans or credit chits; 
Explanation.—Where a money lender is resident outside the Islamabad Capital 
Territory, the agent of such person resident in that area, shall be deemed to  be 
the money lender in respect of that business for the purposes of this Act; 
(k) “Prescribed” means prescribed by the Rules made under this Act; 
 
(l) “principal amount” in relation to loan means the amount actually lent to the 
debtor; and 
 
(m) “Rules” means the Rules made under this Act. 
 
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3. Prohibition of Private Money Lending.—(1) No money lender either individually or 
ingroup of persons shall lend money for any purpose or advance loan to any person for the purpose of 
receiving interest thereon, nor shall carry on an interest based transaction in the Islamabad Capital 
Territory. 
(2) Whoever contravenes the provisions of sub-section (1) shall be punished with imprisonment 
of either description which may extend to ten years but shall not be less than three years and shall also 
be liable to fine not exceeding one million rupees. 
4. Punishment for Abetment.— Whoever intentionally and willfully abets, engages, assists 
or aids the money lender in lending money or in recovery of interest or in interest based transaction in 
contravention of sub-section (1) of section 3 shall also be liable to the same punishment as provided 
in sub-section (2) of section 3 of this Act. 
5. Punishment for Molestation.— Whoever molests any borrower or debtor, whether on his 
own behalf or on behalf of anybody else with intention to force such borrower or debtor to pay back 
any loan or debt or any part thereof or any interest thereupon, shall be punished with imprisonment of 
either description for is term which may extend to five years and shall also be liable to fine up to five 
hundred thousand rupees. 
6. Complaint.— A justice of peace shall, within three days on receipt of any application or 
complaint with regard to the commission of an offence under this Act, order the local police to, register 
a case against such person or group of persons. 
7. Liability to pay interest on debt to stand extinguished.— On the commencement of this 
Act, every obligation of any debtor or borrower to pay interest on debt or such part of interest shall 
stand extinguished. 
8. Offences to be tried by Court.— No Court inferior to that of Judicial Magistrate of the first 
class shall try an offence under this Act 
9. Cognizance of offences.— Notwithstanding anything to the contrary contained in the Code 
or any other law for the time being in force an offence under this Act shall be cognizable, non-
compoundable and non-bailable. 
10. Adjustment of principal amount.— The trial court, if it is proved that the money lender 
committed an offence under this Act, shall order that the interest already paid to the money lender is 
considered as payment towards the principal amount: 
 
Provided that where the amount of interest paid by a borrower exceeds the principal amount, 
the court shall order the money lender to return such excess amount to the borrower. 
11. Recovery of sums.— Where penalty imposed on money lender under this Act or the 
amount ordered to be returned, is not paid,— 
(a)  the Court may order to recover the amount so payable by selling the assets 
belonging to such person; and 
(b)  in case the amount cannot be recovered from such person in the manner 
provided in paragraph (a) the Court may prepare and sign a certificate 
specifying the amount due from such person and send it to the collector of the 
district in which such person owns any property or resides or carries on 
 
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business; and the collector of the district on receipt of such certificate shall 
proceed to recover from the said person the amount specified in the certificate 
as if it is an arrear of land revenue. 
12. Appeal.— Save as provided, any person aggrieved by any decision given, sentence passed 
or order made by the trial court under this Act, may within thirty days of such decision, sentence or 
order prefer an appeal under the provisions contained in chapter XXXI of the Code. 
13. Power to deposit in Court money due on loan.— (1) Where any lender, whether a money 
lender as defined in this Act or otherwise, refuses to accept the whole or any portion of the money or 
other property due in respect of his loan without payment of interest, the debtor may deposit the said 
money or property into the Court having jurisdiction to entertain a suit for recovery of such loan and 
apply to the Court record full or part satisfaction of the loan, as the case may be. 
(2) Where any such application is made, the Court shall, after due inquiry, pass orders recording 
full or part-satisfaction of the loan as the case may be. 
(3) The procedure laid down in the Code of Civil Procedure, 1908, (Act No. V. of 1908), for 
the trial of suits shall, as far as may be, apply to applications under this section. 
(4) An appeal shall, lie from an order passed, by a Court under sub-section (2) within thirty 
days excluding the time for obtaining a certified copy of the order as if such an order relates to the 
execution, discharge or satisfaction of a decree within the meaning of section 47 of the Code of Civil 
Procedure, 1908 (Act No. V of 1908). 
14. Act to override other laws, etc.— The Provisions of the Act shall have effect 
notwithstanding anything contained in any other law for this time being in force or in any instrument 
having effect by virtue of any such law. 
15. Indemnity.— No suit, prosecution or other legal proceeding shall against any person for 
anything which is in good faith done or intended to be done in pursuance of this Act or of any Rules 
made thereunder. 
16. Power to make rules.— The Federal Government may, by notification in the Official 
Gazette and within one hundred and twenty days from the commencement of this Act, make Rules for 
carrying out the purposes of this Act. 
17. Interpretation.— In the interpretation and application of the provisions of this Act, and in 
respect of matters ancillary or akin thereto, the Court shall follow the injunctions of Islam as laid down 
in the Holy Qur’an and Sunnah. 
18. Repeal.—The West Pakistan Private Money Lenders Ordinance, 1960 (W.P. Ordinance 
XXIV of 1960) shall be repealed. 
 
 
 
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         RGN. Dated. 09-10-2025