On October 5, 2009, this writer called on Mr. Naresh Malhotra (State Bank of India’s Deputy General Manager, Overseas Expansion and Planning Dept., International Business Group) at SBI Corporate office in Mumbai.
We discussed at length the issue of developing Islamic Banking products and services for Indian and international markets, legal hurdles, ongoing efforts and alternative options to go ahead with Islamic banking windows. During the meeting we also discussed the Anand Sinha Report. I presented to him a list of legal hurdles as short-listed by Anand Sinha Committee. I also identified the non-controversial products and services for Islamic banking windows in India.
Since Mr. K. A. Najmi has already submitted technical draft on introduction of Islamic Banking to the Government of Bangladesh and has also drafted a Roadmap for Introduction of Islamic Banking in India, his profile was also submitted. With an intention to introduce TASIS to SBI, a broucher was also handed over. I also suggested to Mr. Malhotra that Mr. M. A. Batki may also be called up for his assistance in this regard. Mr. Batki is living in Pune after retirement as legal advisor RBI and has capacity to make technical notes on this issue.
This writer also informed Mr. Malhotra that among the above, Prof. Nejatullah Siddiqui, Dr. Ausaf Ahmad, Dr. Rahmatullah and Dr. M. I. Bagsiraj are Islamic Economists. Mr. Abdul Hasib is a retired Executive Director of RBI. Dr. Shariq Nisar is a Shari’ah Advisor with Doctorate in Islamic Economics. Mr. Ahsanul Haq is a retired Senior Manager for Punjab National Bank. Mr. Khurshid A. Najmi is a retired joint legal advisor of RBI who has also submitted the technical draft to Government of Bangladesh for introduction of Islamic Banking in Bangladesh.
This writer emphasised the works done by Mr. H. Abdul Raqeeb in collecting information about progress of Islamic banking at international level after making personal visits and tireless efforts to collect relative information and persuade the regulators, bankers and policy makers. I introduced him as convener of ICIF and requested to call him for sharing his rich observations and knowledge over this particular issue. His effort to get collective plea comment over CFSR draft report from Doha was also discussed. He is having good contacts with international legal company like Lovels.
Mr. Malhotra told this writer that SBI has already hired few consultants to read the feasibility report on Islamic Banking and Finance. He showed to me some reports and work they did for SBI. He said that SBI is looking for solutions to the legal / regulatory problems in the way otherwise they are convinced with the economics / feasibility reports on Islamic Banking; and thus they are anxious to go ahead.
The recommendation on Interest-free banking by Raghuram Rajan Committee report was also discussed with special note on kind consideration and special interest over the issue by Mr. Vijay Mahajan. I said that since we have a group of Islamic economists, legal experts and Shari’ah advisors, who are continuously working as proponents of Islamic banking in India, it is better for SBI to call a meeting to interact with such people who may share their knowledge and experiences while finding the clues.
It was also discussed that if SBI announces offering listed Shari’ah complaint products and services under Islamic banking windows, interest-free coop. credit societies like AICMEU’s Baitulamal Coop. Credit Society and other interest-free NBFCs may work for SBI as Business Correspondent / Facilitator for such products and services.
Mr. Malhotra said that they had been considering Islamic Banking as mechanism for expansion of overseas business, but today he got a point to consider it as potential for domestic market as well. He is convinced that if SBI goes in international market with having Islamic banking windows in Indian market, it would help SBI boost the confidence level of foreign investors under Islamic laws.
Mr. Malhotra asked this writer about the initiative taken by Kerala Government in this regard. I informed him that there was a two-day international conference at Kochi in this regard and they would do it through forming an NBFC. The Kerala Government is already extending good support. The Centre is expected to do favour because that will yield political, social and economic advantages to the Government. The Gulf countries are also supporting this project. So there would be no problem despite RBI as obstacle with conflict regulations. The regulatory conflicts will be solved through political supports and no controversy will arise till centre and the state government are approaching with similar objects.
During the meeting the scope of introducing equity finance for MSMEs at local level by Indian banks was also discussed with clear demarcation of finance limits as specified for MSMEs so that there could be no conflict in market interest of stock market and banks. The scope of Bai Salam for agriculture sector and Sukuk for infrastructure was also discussed with their impact on economic growth and fiscal consolidation.
This writer requested Mr. Malhotra to arrange a meeting of SBI top executives with the persons he mentioned as Islamic economists, legal experts and Shari’ah advisors to find out ways and means to introduce Islamic banking windows in India.
After 75 minutes meeting, this writer left his office with assurance that Mr. Malhotra would discuss the issue with his higher executives after they come back from Istanbul and may call us back for collective meeting with them.
[SYED ZAHID AHMAD is Asst. Secretary General, All India Council of Muslim Economic Upliftment Ltd. Trust, Mumbai]