A delegation of Indian Centre for Islamic Finance (ICIF), consisting of its General Secretary, H Abdur Raqeeb and two of its trustees Dr. Rahmatullah and Mr. KM Abdul Salam, former Manager of Reserve Bank of India, called on Dr. K C Chakrabarty, Deputy Governor, RBI, at the RBI headquarters in Mumbai on September 11.
The delegation members discussed with the Deputy Governor of RBI the introduction of interest-free banking in India in the light of the recommendations of Dr Raghuram Rajan Committee on Financial Sector Reform (CFSR) which said that it would be possible through appropriate measures to create framework for interest-free products without any adverse systemic impact.
Mr. Anand Sinha-led working group constituted earlier by RBI to examine the Islamic instruments, had compared the conventional and Islamic Banking in a commendable way but concluded that it is not feasible in the current regulatory framework.
The delegation of ICIF, which has been working for introduction and promotion of Islamic Banking in India, impressed upon the Deputy Governor that the RBI should have taken the views of financial services industry as well as the Islamic Financial experts and recommended for regulatory amendment for according a level playing field for those who want to engage in Islamic Banking activities as done in U.K and Singapore. It submitted the documents of Islamic Finance regulations in Non-OIC jurisdiction which gives the details of how regulatory amendments were carried out in UK, Singapore, Japan, France and Hong Kong. These countries made regulatory amendments for level playing ground for Islamic banking to function.
FSA (Financial Services Authority) of UK and MAS (Monetary Authority of Singapore) have brought out detailed documents for Islamic finance institutions which can provide a roadmap for Indian regulators to follow.
The delegation also submitted a very important document of HM Treasury – The development of Islamic Finance in the U.K: The Government Perspective – December 2008 and IMF Working Paper – ‘Introducing Islamic banks into Conventional Banking Systems’ by Juan Sole.
Emergence of Islamic financial institution in Kerala also came into discussion.
The Deputy Governor said that RBI is not against Interest-free Banking but needs a regulatory amendment by the government through the Parliament to include the same.
The delegation emphasised that Interest-free Banking is imperative for the inclusive growth of the minorities and marginalised section of the society and it will open the gate for the flow of investment from liquidity rich Gulf region to our country as they are considering India to be a safe region to invest after 9/11.
The ICIF delegation has fixed an appointment with the Finance Minister Pranab Mukherjee within a week as a follow-up to the discussions with RBI Deputy Governor which will pave the way for regulatory amendments in the parliament or an executive order of Government of India and pave the way for the introduction of Interest-free Islamic Banking in the country shortly.