Confusion on legitimacy of 'Sharia-compliant' - The New Indian Express

Confusion on legitimacy of 'Sharia-compliant'

Published: 05th October 2013 08:52 AM

Last Updated: 05th October 2013 01:28 PM

It seems that the state may lock horns with the RBI over the status of the Sharia-compliant Cheraman Financial Services Limited (CFSL). Coming down heavily on the state government’s initiative in starting CFSL, BJP leader Subramanian Swamy said that the “RBI has not approved any Islamic/ Sharia institution anywhere in the country”.

RBI, in a reply to an RTI application filed by Swamy, stated that the Central Bank has not given licence to any financial entity in Kerala to start an Islamic Bank. The Kerala State Industrial Development Corporation (KSIDC) has an equity share of 11 per cent in CFSL, which obtained NBFI status on July 2. Following reports in this regard, CFSL has removed the ‘Sharia-compliant’ claim from the home page of its website. Now the claim appears only on the ‘About Us’ section under the sub-head ‘Our Approach’.

The state government took initiatives to start an interest- free bank during the Left-front rule in 2010 by starting an entity called Al Barakah Financial Services with KSIDC being the prominent promoter.

But when Subramanian Swamy approached the Hight Court against the move, the company did not proceed with its operations and later CFSL was floated. Replying to an email query on whether he had moved the court against the company, Swamy said that “as such there is no reason to approach courts, as the RBI has not approved any Islamic/ Sharia institution anywhere in the country”.

 “There is another bank by the name ‘Al Baraka’ (‘h’ is absent) functioning in Bahrain, Pakistan and elsewhere. My colleagues had written to them asking whether such similarities (in name) are tolerated. This could be one of the reasons for the name change,” Swamy said.

“Interest-free banking is fraudulent. They collect interest in the form of commission, processing fee, service charges etc. That is why the RBI decided to ban ‘zeropercent finance’ schemes recently,” he added.

Speaking on the issue, CFSL Managing Director A P M Mohammed Hanish said that the company has received RBI’s license for equity financing and leasing.

“We are operating in compliance with RBI’s guidelines. Mainly it is a channel to find funds from NRKs who are not interested in investing their hard-earned money in conventional banks. The fund will be utilised for infrastructure-development projects here,” he added. He said that the company would start functioning by the the end of the financial year.

 

From Around the Web