RBI supports Islamic banking - The New Indian Express

RBI supports Islamic banking

Published: 20th Oct 2013 06:50:04 AM

In its attempt to woo minority votes ahead of the 2014 General Elections, the Congress-led UPA is making every effort to introduce Islamic Banking in India.

The idea was first mooted by Raghuram Rajan in 2008 when he was Chief Economic Advisor to the Ministry of Finance. But the Rajan report did not get the stamp of approval from the RBI Governor of the time, D Subbarao. Rejecting the recommendations, Subbarao conveyed to the government that Islamic Banking was not legally feasible in the current statutory and regulatory framework. He had also made his stand public.

With the RBI governor taking a strong public position, the government too was forced to take a similar stand. With Rajan running the RBI, Minority Affairs Minister K Rahman Khan is now on overdrive to make Islamic Banking a reality. The minister told The Sunday Standard that it would not take much time before Islamic Banking becomes legal.

But the RBI did not confirm the ministry’s optimism. “There are no applications for any approvals lying with us for Islamic banking. Besides, it will take an amendment of the Regulations Act and the RBI Act to introduce Islamic Banking,” a RBI spokesperson told this paper. She said an approval given by RBI to a Kerala-based non-banking finance company that follows Islamic principles was not a blanket permission.

But the UPA is likely to go for it. “No political party, except BJP, will oppose such an amendment in this election year,” said a source in Khan’s office. He said there is a strong demand to introduce Islamic Banking in the country from various quarters. Muslim political parties, including IUML, had submitted a memorandum to the Planning Commission urging it to promote interest-free banking in the country, he said.

In case the government fails to bring in amendments, its next option is to allow more non-banking finance companies that adhere to Sharia principles. “The government shall take measures to permit delivery of interest-free finance on a larger scale, including through the banking system, which is in consonance with the objectives of inclusion and growth through innovation as recommended by Rajan,” said H Abdur Raqeeb, an Islamic Banking expert.

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Comments(24)

Islamic Banking system is essential to our nations development. Kindly implement, so that many business oppurtunities are yet to arise from our various market.

The world economy is staggering under debt trap. The panacea is a economic system based on profit loss sharing and not on lending at interest. The Islamic economic system offers a solution where money is not a commodity but medium of exchange and hence can not be rented out. India should grab this opportunity and move forward to introduce interest free economic system.

Before RBI moots any such stupid bombastic idea of Islamic Banking system, it must first examine as to what is the current BAD DEBT SITUATION of each nationalized banks in India. Many of the public and private banks are paralysed with unbelievable bad loans and dismal recovery status and on top of it, this great Islamic Banking will ruin the nation. We have many PSU organizations which have been mismanaged by the govt, resulting in crores of tax payers money being drained out and here is this stupid Governsor is mooting and trying to push thru his equally stupid ideas to fool ht epeople of the nation. It is time people of the country wake up to this threat and ensure such great notion such as ISLAMIC BANKING does't come up at all...

The BAD DEBT SITUATION is due to the imbalance created by charging interests Mr.Raghav. Each and every business has profits and losses. But these so called interest businesses expect one sided profits only. Interest ..Interest ....Interest....Imagine..!! Only a day on earth without any night? U might live on earth for not more than 60 or 70 yrs. out of which your proper working of brain might not b more than thirty years. Even then there is no guarantee for that. But the Creator of the universe, the omnipresent, the most knowledgeable, the ever living and the provider of sustenance to all its living creatures on earth knows better than u all know. And in its Final Revelation he has forbidded u humans of practising usury. He has ordered u all humans to live in peace n harmony by cooperating each other. What is the elergy to you people with the word Islam? Islam means Peace. What's the problem with u all people? Inspite of worshiping so many assumed GODS u all are lagging behind, in debt

Interest is the time value of money while profit sharing is the nature of capital invested in the business. Banks loan short term funds and the return on their investment is naturally time value of money. There are several venture capitalists out there who invest with profit sharing motive. When the two distinct systems are available for entrepreneurs, where is the need for an islamic bank? If India start islamic bank systems, the disputes will have to be dealt with through Sharia Courts manned by madarasa educated mullas and maulvis. Is india ready to run a parallel judicial system? Why is it that Indian government is eager to do stuff that other non-muslim governments do not even care? Is its secular spirits so sprightly that it could not even enforce a uniform law in its own territories leave alone other parts? A time to put a full stop to this non-sense.

Dear Vanthia Thevan! Islamic banks are similar and offer same services as any other bank. While experienced bankers operate them under all local laws in vogue, Islamic law experts offer guidance from the applicable clauses of Islamic law. Top executives in many Islamic Banks are non-muslims. You are under influence of negative mindset in this regard. You will find Hindu and Sikh executives in Malaysia based Islamic Financial Institutions. I advise you and other truth-seeking friends to visit some of the IslamicMany Non-muslims as Managers, customers are attached to these institutions. To clear doubts I request you and other friends to please visit some of the banks' sites online. By allowing it India can benefit itself with huge inclusive empowerment; check corruption effectively through transparancy in functions; improve the health of Urban and Rural Credit portfolios by bringing in Profit-linked earnings etc.etc. We need to shed bias here. Posted by SYED ILYAS BASHA 23rd Oct 2013

Dear vanthia thevan. Please shed prejudiced against anyone.In the basic form, the banking system, if I may call it so, is similar in Judaism, Christianity, Islam and Hinduism. They all advocated interest- free lending. A look at the relevant text would reveal this position. For example in Hinduism " Vasishtha, a well-known Hindu law-maker (700-100 BC), prepared a special law which forbade the higher castes such as Brahmans and Kshatriyas from taking up professions of usurers or lenders at interest." Buddhist text such as Jatakas, referred usury (interest) in a demeaning manner: Ascetics who practice usurious activities are labelled as “hypocritical ascetics”. Usury later became a comparative concept as the time and the tenets changed as inferred in the Laws of Manu. You may kindly read "Indigenous Banking in India Jain, L.C. (1929)" for better comprehension. Also your language against RBI governor is very inappropriate.

KIndly also introduce the sharia system of punishment for those seeking things based on religion.

i cant understand if we all r supposing us as a human being then what types of humanity this is under which we r enjoying intrest at the cost of someone's obligation.why we should not stop it?

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