New Delhi, Nov 13: It was widely reported in the media yesterday that the Reserve Bank of India (RBI) had effectively shut its door to Islamic Banking in India. Replying to a RTI application filed by a Press Trust of India (PTI) correspondent, India’s central bank stated: ‘’ Taking into account, the wider and equal opportunities available to all citizens to access banking and financial services, it has been decided not to pursue the proposal further’’.
However the body that has been diligently pursuing the introduction of Islamic banking in India is still hopeful that things may change in the near future and India will open its doors to Sharia or Interest-free banking. IndiaTomorrow.net got in touch with H. Abdur Raqeeb the General Secretary of (icif.in) Indian Centre for Islamic Finance (ICIF) and asked him to respond to the RBI’s decision:
India Tomorrow: Your reaction on RBI decision not to pursue the proposal to introduce Islamic banking in India.
H. Abdur Raqeeb: This is unfortunate and sooner or later the Finance Ministry and RBI has to reconsider its decision. Already Interdepartmental Group (IDG) of RBI has done elaborate deliberations and presented to Finance Ministry suggesting that few Islamic products will be introduced in conventional banks with the nomenclature - Participatory Banking. For this to happen Government of India has to issue a notification only and no amendment in Banking Regulations is necessary. Again RBI had constituted a committee on Medium Term Path on Financial Inclusion on instructions of Prime Minister Modi which has one full chapter on interest free window – namely Chapter 5 elaborating why it is necessary and finally recommending interest free windows in banks. Also Committee on Financial Reforms headed by Dr Raghuram Rajan had also recommended this for inclusion of those whose faith doesn't permit to participate in the Banking system. So it is strange and unfortunate that RBI has to contradict what it has submitted to Finance Ministry in two important reports
What do think is the reason for RBI to disallow Islamic banking in India whereas it is permitted in the UK, Singapore and many European countries?
H. Abdur Raqeeb: It seems the political situation prevailing in the country is responsible for this decision and sooner or later it (RBI) has to review its stand and go for an alternative system of Finance & Banking as has been done in several secular modern and industrialized countries. Both the government and RBI should not see through (this proposal to start Islamic Banking) religious angle but from a financial perspective.
What will be ICIF agenda after the decision of RBI ?
H. Abdur Raqeeb: ICIF will work on three fronts:
1. Creating awareness about need and relevance of interest free Islamic Finance and Banking among all stakeholders particularly among Muslims and the marginalized sections of society.
2. Remove misunderstanding among general public that this proposal is Muslim specific rather it is beneficial to all people. For example in Malaysia customers and beneficiaries are other communities and in Sharia compliant mutual funds like Tata Ethical and Taurus Mutual Fund the investment by the Jain community is more than 50 %
3. Meet and convince regulators, political class and community chiefs that Islamic finance is for inclusive growth and can be used in infrastructure development which PM Modi is envisioning in our great country.
Do you think Islamic banking will ever be permitted in India in near future?
H. Abdur Raqeeb: If London, Hong Kong and Tokyo can have it why not Mumbai?