GOVT’S BACKING OUT FROM INTEREST-FREE BANKING WINDOWS AN UNWISE DECISION
Observing a series of side effects created by demonetization, the desperate government is now working under pressure and has perhaps lost the courage to take bold decisions. It has also lost the wisdom, and is working under pressure of alliances. The pressure was built by allied political parties like Shiv Sena and AIADMK to oppose banking windows in the name of religion.
On 7th December 2016, Shiv Sena MP Shri Chandrakant Kahire made a plea against allowing ‘Islamic banking window’ in banks, during zero hour in Lok Sabha. On 9th December M.P. Smt. K. Maragatham from AIADMK party specifically asked the Minister of Finance in the lok Sabha if the Reserve Bank of India (RBI) has a proposal to open the Islamic window in conventional banks for gradual introduction of Sharia compliant or interest-free banking in the country. She also asked if the government has examined the legal, technical and regulatory aspects of such a proposal and if it has then what is its response.
According to a PTI report, Minister of State for Finance Shri Santosh Kumar Gangwar in reply to AIADMK leader Smt. Maragatham’s query in the Lok Sabha said that the objective of the financial inclusion for which Islamic banking was explored by RBI has no relevance as government has already introduced other means of financial inclusion like Jan Dhan Yojana and Suraksha Bima Yojna for all citizens.
He further said that RBI had set up an inter-departmental group on Islamic Banking and the entire exercise was aimed at promoting financial inclusion attracting finance from Gulf countries for infrastructural development.”However, on consideration of inter-departmental group report, it is observed that even to introduce limited products, various legal changes would be required,” he said.
MP Asaduddin Owaisi had once filed a private bill in the Parliament to raise a debate over Islamic Banking. The day Mr. Gangwar declined RBI’s proposal about Islamic Banking in Lok Sabha Mr. Owaisi remained silent. Later during a program on NDTV where he was lamenting the discrimination against Muslims in availing cash from ATMs, he was found unaware of Mr. Gangwar’s statement. Barkha Dutt updated him that his input through Zafar Sareshwala is old and according to latest update the government has dismissed this matter.During the same program, much to viewer’s amusement the RSS spokesperson expressed apprehension of religious conversions taking place due to Islamic Banking.
It seems that the government is opposing Islamic banking under pressure from RSS to avoid possible religious conversions. With such a fear of conversion, no move can be expected towards Islamic banking in India.
However it is a blessing in disguise for Muslims that the proposal for Islamic Banking windows has been discarded. The so called Islamic banking is in reality non-Quranic and its good that Indian Muslims will not be indulging in it.
But if political leaders like Asaduddin Owaisi and Azam Khan still want to portray that they care about Muslims in India, they may raise following questions to the Government of India.
- Why the State Finance Minister discarded RBI’s proposal meant for financial inclusion of Muslims without discussing the it in the Parliament?
- What were the difficult legal changes that RBI had suggested in that proposal?
- How can the State Finance Minister be so sure that there is no need of interest-free banking for financial inclusion of Muslims when RBI has made specific recommendations?
- Does the State Minister have more expertise on financial inclusion than RBI? Does he want to say that RBI had not evaluated the significance of Jandhan and Bima Yojna for financial inclusion of Indian Muslims before making proposal of Islamic Banking windows?
- What specific strategy or plan is the government suggesting to overcome the financial losses (worth Rs. 2 lakh crores) to Indian Muslims due to unavailability of interest-free finance from banks?
Though Indian Muslims are now immune to such steps by the government whether it is Congress or BJP, the so called Muslim sympathizers are also exposed on how they choose to speak on certain issues while allowing the continuation of loot over Muslim’s savings through banking channel. The Congress kept this practice during its regime and now BJP is continuing it without disturbance. And amidst the political battle between Rahul and Modi the so called secular political leaders rated as Muslim Sympathizer (including Laloo Prashad Yadav, Mulayam Singh Yadav, Nitish Kumar, Mamta Banerjee and Mayawati) are mum over it. Perhaps they do not want Muslims to come out of their poverty and illiteracy lest it should become difficult to fool them during elections.
More awkward than anything else is the silence of religious leaders on this matter. While they gladly invite political leaders to Eid Miladun Nabi celebrations they did not ask these leaders to counter the State Finance Minister for discarding the proposal of Islamic banking windows? Perhaps they have turned into agents of political parties/ leaders to gather masses through religious events like Eid Miladun Nabi, Urs etc. so that their political messiahs could deliver sought lectures to target audiences.
Interestingly interest is forbidden not only in Islam, but also in Christians and Judaism. Interest has also been condemned in Vedas, so ideally Hindus should also avoid dealing in interest.
In gulf countries attempts were made to mobilize surplus capital held by Muslims in the name of Islamic banking. There is no instruction as such regarding development of Islamic banking in the Holy Quran or Hadith. On the contrary the promotion of so called Islamic banking is practically diverting their Muslim customers from carrying out core Islamic financial obligations and recommendations like Sadqa, Zakat, Waqf and Qarz E Hasna etc. So, as a Muslims I am against the call for any banking model in the name of Islam.
For commercial transactions based on Islamic principles, there is no legal obstacle in India. Musharaka (partnership on profit – loss sharing basis) is not prohibited in India; and so anyone wish to perform Musharaka can execute it without any legal hurdle. There is no specific need to execute Musharaka from Bank or NBFC only. Any individual or enterprise wishing to execute Musharaka, Murabaha, Bai Salam or Istisna etc. can execute it in India without any legal hurdle. The only problem is that Muslims now prefer to put their savings into banks instead of sharing their surplus with others by mode of Musharaka or Murabaha. The lack of accountancy, book keeping, transparency and honesty are factors forcing surplus capital holders to park their surplus with banks instead of sharing with needy. If we as community want to see Islamic economic practices take place in the economy, we as Muslims have to be fair, honest and transparent in our transactional behavior. Unless we improve our transactional behavior, we cannot promote Islamic economic practices in this world. We would keep losing financial resources through banking channels.
Muslims form a large proportion of India’s population and as such they have a considerable contribution in the national income. Their backwardness would pull the economy down and their growth will push the economy up.
Though we are glad that any banking in the name of Islam has been discarded, the government is supposed to provide justice to all citizens of India irrespective of caste and religion. The continued financial deprivation of Indian Muslims (due to unavailability of interest-free finance in banks) is one of the main causes of their backwardness.
If the Government is really serious about its slogan of Sabka Saath Sabka Vikaas, it needs to ensure that Muslims are to be pulled out of their financial exclusion.
If Government is really willing to help the poor and ultra poor people, there could be provision for piloting micro equity funds and lease financing at retail level wherein Micro Finance institutions can be engaged to empower the micro entrepreneurs to groom their accounting and managerial practices to reach a level where they can avail micro equity funds or lease finance. This would help India empower the micro entrepreneurs and convert them from unorganized to organized enterprises.
Otherwise without regulatory reforms, the present demonetization is hitting the cash based economy hard and the most adversely affected economic units would be our micro enterprises which are otherwise found highly risk weighted units for banks to finance. Unless these units are empowered through institutional and market linkages any financial support may gone in vain.
Therefore, it is high time the government should seek framing reforms to empower Micro enterprises to facilitate the poor workers in India. It is hoped that the government will certainly plan micro equity fund deployment through such agencies which are experts in empowering micro enterprises by upgrading their management though institutional support and market linkages.
Posted Date: 01 January 2017