Money & Banking

‘Sharia-compliant banking will see 15% global growth’

Our Bureau Mangalore | Updated on November 22, 2017 Published on July 09, 2012

Sharia-compliant banking is expected to witness a global growth of 15-20 per cent, according to a banker.

Delivering a lecture on ‘Global banking scenario and challenges’, organised by the regional office of Indian Overseas Bank here on Saturday, Dr Rajesh Nayak, director (training), Central Bank of Oman’s College of Banking and Financial Studies, Oman, said that sharia concept of banking is attracting bankers in some Western countries. At present, there are around $1-trillion banking assets under this concept, he said.

Sharia-compliant banking emphasises on sharing risks than shifting risks. It is based on the principles of prohibition of interest and prohibition of uncertainty.

Explaining two techniques of this banking, he said one technique focuses on the joint venture between the banker and the customer. Under this, the banker contributes the capital and the customer his management capacities. Both of them share the profit in this technique.

The second technique is based on the cost plus sale model. The bank invests in the cost of the product and sells it with a profit.

If introduced in India, he opined, both the traditional banking and sharia-compliant banking can exist together. There is a good potential customer base for sharia-compliant banking in India, he said.

On the challenges in banking, he said the banks should not adopt FMCG (fast moving consumer goods) strategy to market retail loans. In FMCG segment, the role of the manufacturer ends once the company sells the product. In banking, the role of the banker begins once he sells the product.

He said the rebranding exercises in banking sector should provide better experience to customers. To provide this, staff should be well-trained. In some case, re-branding ends with the change of logo, and the customer experience remains the same, he added.

Published on July 09, 2012

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