Question: I live in India. Here the government is non-Muslim. I wanted to know if bank interest is Halal in a non-Muslim country as I heard that there is a Hadith which says so?

   Answer: Taking Interest is prohibited whether in a Muslim country or in a non-Muslim country because of the fact that it is inherently an unethical contract. Things which are unethical are prohibited whether they be with Muslims or non-Muslims. In other words, just as one should be honest not only with Muslims but also with non-Muslims, similarly one should also not be selective on the basis of religion in taking interest.
    The Hadith you have referred to is not an authentic one¹ and is also not found in the six major books of Hadith. Its content also contradicts the Qur’an. As a result, I am afraid it cannot be accepted.

There is no interest between a Muslim and his enemy with whom he is at war. (Bahqi)