Wadiah

Wadiah (Arabic: وديعة, literally 'safekeeping' or 'custody') is an Islamic deposit contract in which one party (depositor/Mudi) entrusts property to another (custodian/Wadi) for safekeeping. Two forms govern modern banking: (1) Wadiah Yad Amanah ('trust safekeeping') — the custodian holds the deposit in trust with no right to use it and bears no liability for loss unless negligent; (2) Wadiah Yad Dhamanah ('guaranteed safekeeping') — the custodian may use the deposited funds in their business and guarantees repayment of the full amount on demand, making them liable for the principal. Islamic banks use Wadiah Yad Dhamanah for current (demand deposit) accounts: the bank may use deposits in its operations and guarantees return of the full principal at any time. Any gifts (Hibah) given by the bank are discretionary, not contractually promised. Malaysia has built much of its retail Islamic banking deposit base on Wadiah structures, regulated by Bank Negara Malaysia.