RBI has a positive approach towards Islamic banking: Minister

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K. Rahman Khan
K. Rahman Khan

But wants certain amendments to laws

The Reserve Bank of India has taken a positive approach to the suggestion of an alternative banking system for Muslims, subject to certain laws being amended first, K. Rahman Khan, Minister for Minority Affairs, said here recently.

“I have written to the RBI Governor, invoking Section 25 of the Constitution, saying that it was the duty of the State to facilitate every citizen to practice and follow his/her religion,” he said, adding that Muslims being given no option but interest-based banking amounted to obstruction in practice of religion.

Khan said the RBI Governor had written back accepting his view, but pointing to the need for certain amendments to the laws concerned. The Minister was addressing a session on ‘Islamic Banking and Finance: Global Trends and India’ at a two-day conference organised by the Institute of Objective Studies.

The Minister said, in India the biggest issue was who should regulate the proposed alternative system, as it needed a strong monitoring mechanism. It could be a new law or amendments to the existing law, but I am hopeful of an outcome soon, he added.

At present, about 60-70 per cent of the 200 million Muslims in India are excluded from the conventional banking system (Shariah law prohibits riba (interest)-based financial transactions) because of lack of Shariah-compliant financial instruments.

Khan said Islamic banking had been adopted by 75 countries, including the UK, and added that India could no longer afford to stay away from the $1.5-trillion Islamic financial market, which could even help address the country’s huge fiscal deficit.

However, the Minister pointed out that no concrete effort had been made by the Muslim community in this regard. “Raising a demand alone will not help,” he said, and added that concrete efforts should be made, such as setting up an expert committee to draw up a framework of an alternative banking system, along with a strong legal system to back it.

(This article was published on February 17, 2013)
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Interesting to note the view point of Minister Rahman Khan. If RBI and
Government work together seriously, the changes in Law can be done
very quickly. Perhaps, Mr. Rahman Khan should take another initiative
in putting together a working committee of Parliamentarians who could
facilitate the coordination between RBI and Parliament in bringing in
necessary changes.

As for putting together groups of Banking experts and Legal
luminaries, I am very sure that there is plenty of talent of
practising Islamic bankers, Shariah experts, Muftis, Lawyers who are
familiar with Shariah. Such experts are not only Muslims but come from
all communities.

It may also be a good idea to name this type of banking as Alternate
banking or participatory banking as suggested by many in the field to
make it acceptable to a secular country like ours.

We are all with you Mr. Rahman Khan and all the best in your efforts.

from:  M.K.Zaman
Posted on: Feb 18, 2013 at 09:35 IST

It would be clear if shri Rehmanji clarifies whether interest based
banking system should be done away with for deposits or loans ?. If
interest is waived for loans, how banks will run or who will fund bank
for running their operations ?

from:  Rajaram
Posted on: Feb 18, 2013 at 11:11 IST

If the interest rate concept is abolished, then the financial
organisation may not be entitled as "BANK". It may be then entitled as
"Society" or NGO based on not for profit philosophy.It should be
confined within their societies only as interest rate is not a problems
for others. ...............................

from:  SM
Posted on: Feb 18, 2013 at 15:02 IST

Good news from the Minister. India needs an alternative banking system for its infra-structure development and also effective utilization of the untapped funds. Although a basic minimum awareness is created about Islamic Banking, yet it is a long way to go to educate the masses the advantages of this alternative / participatory banking system. For most of us bank means interest and interest only. Islamic Banking is a new concept for India, need extensive campaign. A humble start of the system will pave the way towards awareness.

from:  Nazeer Ataullah
Posted on: Feb 18, 2013 at 19:31 IST

Mr.Rehman Khan as a minister for minority affairs should be
congratulated on his hard work to convince the Government of India and
as well as The Reserve Bank of India, both are main king pins to take
a firm and positive decisions to introduce the new banking system (I
personally don't care for the name given to the new scope that is
going to be emerged) which could help millions of poor and down
trodden communities, irrespective of their religion, cast and creeds.
I am sure that the new system of Banking, once it blooms the fragrance
will spread like wild fire to the nook and corners of Indian sub-
continent in order to generate new methodologies for the alternative
banking system. All the intellectual strata of the Indian communities
should join hands to see the growth of the banking system so that our
poor citizens at large could become a supporting element for bringing
our national economy to greater heights of prosperity to the Indian
Nation. Let's all collectively support this.

from:  Mohammed Shakir Hussain.
Posted on: Feb 19, 2013 at 17:30 IST
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