The Government of India has once again put in cold storage the demand of a section of the Muslim community for introducing interest-free banking system in the country. The government has told the Rajya Sabha, with reference from Reserve Bank of India, that Islamic banking is not legally feasible for banks in India or Indian banks abroad.
Union Minister of State for Finance Namo Narain Meena, in a written reply to a question in Rajya Sabha on 27th March, said that RBI has informed that in the current statutory and regulatory framework, “it is not legally feasible for banks in India to undertake Islamic banking activities in India or for branches of Indian banks abroad to undertake Islamic banking outside India.”
The minister said the RBI had received references from the India Centre for Islamic Finance (ICIF) for introducing interest-free banking in the country in order to ensure inclusive growth with innovation in accordance with recommendations of the Raghuram Rajan Committee.
Islamic finance as viable alternative
However, H Abdur Raqeeb, General Secretary, ICIF, has reiterated his arguments in favor of Islamic banking in the country. “Islamic finance has emerged as a viable alternative world over after the financial meltdown of the west. It is growing at the rate of more than 15%. Not only Muslim countries but modern, secular and industrialized countries like UK, France, Japan, Singapore and Hong Kong have become hub of Islamic finance & banking. Even World Bank considers it as a priority area,” said Raqeeb.
He said India needs huge funds for infrastructural development and Islamic banking window can play a big role in this regard.
“Our country needs US$ 1 trillion to upgrade its infrastructure in order to achieve its target of an annual growth of 9.0% - 9.5, almost double in the 12th Five year plan than the 11th Five year plan. Standard &Poor’s document released on Oct 13 2011 - "Will Islamic finance will play a key role in funding Asia's huge infrastructure task?" - mentions that conventional lending markets being jittery the world is now looking towards alternatives to conventional finance and Islamic finance is one such alternative,” he said and demanded the government to reform its policies.
India should reform policies
“It is high time that India should reform policies concerning project execution and long term funding as urged by S&P Report. It has to develop Sukuk(Asset based Bond) market for Infrastructure Development as developed in Malaysia, Middle East & Europe and introduce interest free Islamic finance and banking for inclusion of the marginalized and the minorities either by an executive order or amending the regulations,” said Abdur Raqeeb, who has been striving for long for introduction of Islamic banking system in the country.
Islamic banking window at some banks as pilot project
Abdur Raqeeb said that Islamic banking window should be opened at some banks as pilot project to check the feasibility of interest-free banking system. He urged the prime minister to think about it.
“It is requested that Hon’ble Prime Minister and Finance Minister urge RBI to introduce alternative Banking window as a pilot project in a few conventional Banks which requires on an Executive order from the Finance Ministry. For a full-fledged alternate banking constitute a committee of experts to explore the feasibility of alternative interest free banking in the country in the light of the experiments carried out in modern, secular and industrialized countries like UK, Hongkong, Singapore, Japan and recently in China as well,” he said.
Interest prohibited in Islam, but how many Muslims demand interest-free system
Interest is prohibited in Islam, every Muslim knows it. But the demand for interest-free system is made by negligible number of Muslims. So why blame government always for not hearing you?
source: TCN News