New Delhi/ Mumbai: The Reserve Bank of India’s decision to scrap its plan to introduce shariah compliant Islamic banking in the country has come as a bolt from the blue for the 200 million strong Muslim population in the country. Merely last year, the RBI had concluded that the Islamic banking will be a boon for the Indian economy in general and banking sector in the country in particular.
Now taking an about turn, the Reserve bank of India, the country’s central bank has said that implementation of the Islamic banking in the country may not be feasible. It also added that all the sections of the society are well integrated in the country’s banking system and thus there was no need for launching shariah compliant banking in India, the second largest economy in Asia.
While responding to an RTI on when or whether the RBI will allow Islamic banking in the country, RBI said, “Taking into account the wider and equal opportunities available to all citizens to access banking and financial services, it has been decided not to pursue the proposal [to introduce Islamic banking] further”.
It should be kept in mind that the proposal to introduce Islamic banking was first made by a committee on financial sector reforms, chaired by former Reserve Bank of India Governor Raghuram Rajan, in 2008. “Certain faiths prohibit the use of financial instruments that pay interest,” the committee had said. “The non-availability of interest-free banking products results in some Indians, including those in the economically disadvantaged strata of society, not being able to access banking products and services due to reasons of faith.”
The latest decision of the RBI has disheartened the proponents of the Islamic banking in the country. H Abdur Raqeeb, the general secretary of the Indian Center of Islamic Finance told ViewsHeadlines that the RBI decision was unfortunate. He said that it was surprising that the Reserve Bank of India has to contradict what it has submitted to FinMin in two important reports
Abdur Raqeeb, went on to add, “It seems the political situation prevailing in the country is responsible to take this decision and sooner or later it has to review it’s stand and go for an alternative system of Finance & Banking as done in several secular modern and industrialised countries. If London, Hong Kong Tokyo can have it why not Mumba?”
When asked as to whether the decision reflects anti-Muslim bias of the current dispensation at the center, Abdur Raqeeb added that “both Govt and RBI should not see through religious angle but from a financial perspective”.
He said that his organization is working to remove misunderstanding that the Islamic finance was a Muslim specific thing. He said we are trying to “remove misunderstanding among general public that it is Muslim specific. It is beneficial to all people and we are citing example that in Malaysia customers and beneficiaries belong to all the communities. In shariah compliant Mutual funds like Tata ethical and taraurus Jain community is investing more like 50/percent”.