The Islamic Republic of Iran
Following the revolution in 1979, steps were taken to bring the banking system's operations into correspondence with the requirements of Islamic law. In February 1981, certain administrative steps .were taken by the Bank Markazi (the Central Bank) to eliminate interest from banking operations, as a result of which interest on all asset-side transactions was replaced by a 4 per cent maximum service charge and by a 4-8 per cent minimum profit rate, depending on the type of economic activity. Interest on the deposits was also converted' into a guaranteed minimum profit. In the meantime, preparations got underway for submission of comprehensive legislation to bring the operations of the entire banking system into compliance with the Sharia. The legislation, prepared by a high-level commission (composed of bankers, academics, businessmen and religious specialists), was passed by the Parliament in August 1983 as the Law for Usury-Free Banking (the Law). The Law required the banks to convert their deposits in line with the Sharia within one year, and their total operations within three years, from the date of the passage of the Law. The Law specifies the types of transactions that must constitute the basis for asset and liability acquisition by banks.