No steps have been taken in India for the introduction of Shari’ah-compliant mutual funds, despite the government making plans for their introduction in December 2014.
The Reserve Bank of India (RBI), replying to a request for information, said that it had given the government advice on the setting up of an Islamic-compliant financial system. It claims to have done so the very same month the government started its plans.
According to Live Mint, the State Bank of India planned to do the same, but deferred on its comments. It wanted to make “a better and more attractive” fund in the future.
“It is a misconception that Sharia-compliant mutual funds are beneficial to a particular community,” H Abdur Raqeeb, general secretary at the Indian Centre for Islamic Finance, told the publication. “These funds will benefit the economy and ensure financial inclusion of those who avoid such investment for religious reasons.”
The RBI has previously proposed the opening of an “Islamic Window” for conventional banks to gradually introduce Shari’ah-compliant services.
“In our considered opinion, given the complexities of Islamic finance and various regulatory and supervisory challenges … Islamic banking may be introduced in India in a gradual manner,” it wrote in November 2016.
“Initially, a few simple products which are similar to conventional banking products may be considered for introduction through Islamic window of the conventional banks after necessary notification by the government.”
An inter-departmental group has been set up by RBI, charged with examining the legal, technical and regulatory issues of starting interest-free banking in India.
Ain’t big enough for the two of us
Late last year the RBI stood against a proposal to introduce a new payments and settlements regulator in India.
A motion was put forward that the RBI become the regulator for SIPS (systematically important payment systems. A new board would have been set up for retail payments, the Payments Regulatory Board (PRB). The group suggested that the PRB be an independent body, something which RBI was quick to shoot down.
“There is no need to create confusion by artificially bifurcating payment systems for bringing them under two sets of regulators,” H. R. Khan, former Deputy Governor of RBI, said at the time.
“The idea of segregating retail payments from wholesale/systemically important payments system does not gel with the increasing global recognition of importance of retail payments system.”