At a time when the National Commission for Minorities is pressing hard upon the Union Finance Ministry to explore ways to start interest-free banking in the country, the recent RBI directive has dampened its spirit.
With the RBI cancelling the licence of Alternative Investments and Credits Ltd (AICL) on April 23, 10 years of the company’s operations have come to a halt. AICL is the only non-banking financial company (NBFC) in India which is operating on the interest-free Islamic banking principle.
The RBI’s move has evoked doubts about the future of Al-Baraka Financial Services, another Islamic banking company, which is yet to get a NBFC licence from the RBI. The state had floated the idea of establishing Al-Baraka Financial Services way back in December, 2009. The Kerala State Industrial Development Corporation (KSIDC)is a major stakeholder of the Al-Baraka Financial Services.
“In 2009, the Kerala government had submitted a report to the RBI stating that the AICL has been operating successfully on the principles of Islamic banking and asked the RBI to grant the licence to Al-Baraka Financial Services as well. But now, after completing 10 years of successful operations, our licence has been cancelled,” said
Thanveer Muhiyudheen, company secretary, AICL. A writ petition has been filed before the Bombay High Court against the RBI’s decision, said the official.
Amounts worth thousands of crores earned as interest on loan amount is kept in suspended accounts in various banks in India, as the believers of Islam do not claim it. In Kerala alone, the amount is pegged at above ` 40,000 crore, according to a 2005 estimate.
“Now the amount is 10 times than what it was in 2005 and is increasing. In Kerala, we could tap money from the Gulf countries for our infrastructure projects by forming Islamic finance companies. The RBI directive has shut the door upon this opportunity,” said K K Ali, chief executive officer, AICL. Meanwhile, C Sherif, chief operating officer, Al-Baraka Financial Services, refused to comment on the issue.