What should I do with interest money from the bank? Can I give it to my poor relatives?
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As a general rule, no Muslim by his free choice should deposit his money in an interest-bearing account. You must immediately transfer your money to a non interest-bearing account.
It is incumbent upon you to give the interest money from the bank as charity to the poor who are entitled to receive Zakaat (i.e. who do not have the nisaab of Zakaat) without the intention of receiving reward. This charity is meant only for disposing of an unclean and unlawful money and to relieve oneself from the burden of an ill-gotten gain.
But it should be remembered that this amount is unclean only for the person who has received it as interest. The poor persons who get it from him as charity can use this amount for their personal benefits.
You may give the interest money to your relatives who are entitled to receive Zakaat.
(Contemporary Fatawaa: pg. 242, Idara-e-Islamiat)
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And Allah knows best.
Mufti Faizal Riza