To discuss the feasibility of Interest-Free Islamic Banking in India, a delegation headed by H Abdur Raqeeb, General Secretary New
Delhi based Indian Centre for Islamic Finance (ICIF) met Union Finance Minister Pranab Mukerjee in Kolkata, and submitted a memorandum to him on October 24. The Finance Minister went through the 3-page memorandum and keenly read the recommendations of Raghuram Rajan Committee on Financial Sector Reforms – CFSR on Interest-free banking.
The CFSR recommendations say: “The Committee recommends that measures be taken to permit the delivery of interest-free finance on a larger scale, including through the banking system. This is in consonance with the objectives of inclusion and growth through innovation. The Committee believes that it would be possible, through appropriate measures, to create a framework for such products without any adverse systemic risk impact.”
He noted down that Interest-free Banking is not only for Muslims but for all. In Malaysia 40% customers are Chinese, who are Non-Muslim and in Britain 20% customers are Non-Muslims. He also noted that the Vatican has recommended Islamic finance to western banks for its emphasis on ethical investments and being socially responsible investment and an alternative to the conventional banking.
The Finance Minister was briefed on the decision of the Government of Kerala which has launched an Islamic investment company with Rs.1000 crore after the feasibility report of Ernst & Young and has plan to turn it to a Global Islamic Bank after prevailing upon RBI to amend its Banking regulations.
Among the five options provided in the memorandum (Options of GOI), issuing directions and administrative guidelines, creating a subsidiary and going for an Act of Parliament also attracted his attention and he took note of it.
FM said that he is going to meet RBI Governor next week and will discuss with him on this issue.
He also said that he will be visiting Saudi Arabia and will be available in the second week of November and then a meeting can be arranged with the secretaries and officials of Banking Department of Finance Ministry to interact with ICIF.
The delegation was impressed by the keenness of the Finance Minister in the subject, and expects that the government will take steps to implement the recommendations of the Raghuram Rajan Report in near future.