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Bai- as-Sarf is a contract of exchange of money for money. This contract is tightly regulated under Shari`ah because it can be easily manipulated for the purpose of producing an interest-bearing loan, which is prohibited in Islam.
In pre-Islamic times gold was exchanged for gold, silver for silver and gold for silver or vice versa. In Islamic law such exchange is regarded as sale of price for price and each price is consideration of the other. It also means sale of monetary value for monetary value i.e. currency exchange.
Ibn Rushd examines the three forms of sale that can arise in a market where goods and money are in existence:
"When two commodities are exchanged, one may serve as a currency and the other as a priced commodity, or both may be currencies. When a currency is exchanged for a currency the sale is called 'sarf', and when a currency is exchanged for a priced commodity, the transaction is sale property ('bay'). Similar is the sale of a priced commodity for another priced commodity (barter)"
In respect of Bank, Bai-as-Sarf is a contract/agreement between the Bank and the Client under which the Bank purchase the foreign currency against the Foreign documentary bill in advance from the Client at specified/agreed exchange rate.
“Bai-as-Sarf (FDB) ” is practiced for providing post shipment finance facility against Foreign Currency export Bills and “Bai-as-Sarf (FCD) ” is done for providing advance finance facility against Foreign Currency Cheque /Draft