Islamic banking has been gaining momentum after the recent global meltdown and many countries, including India, are opening their doors for it, an international Islamic banking expert said here.

Islamic banking is based on the principle of profit-sharing rather than charging interest.

“The current volume of Islamic banking is $1.2 trillion. It is very small and less than 1 per cent when compared to conventional banking, which is nearly $243 trillion. But this $1 trillion was achieved within 40 years. This is growing 15-20 per cent much faster than conventional banking,” expert Mr Madzlan Husain told PTI on the sidelines of 17th Commonwealth Law Conference being held here.

According to him, as many as 75 countries all over the world have recognised the need for Islamic banking and opened the doors for it.

The segment constitutes nearly 22 per cent of the total banking in Malaysia, which is considered as the hub of Islamic banking. It has been growing at nearly 20 per cent in countries like Kuwait, Bahrain and Saudi Arabia.

“The number is definitely growing. Recently, India also allowed Islamic banking in Kerala. The global financial crisis contributed to the growth. They feel that there is something structurally wrong with conventional banking system. Even countries like China, Korea are also implementing Islamic banking,” Mr Husain said.

Recently, the Kerala High Court paved the way for setting up an Islamic bank by dismissing the Janata Party leader Mr Subramaniyam Swamy’s plea challenging the State Government’s decision to start an Islamic bank.

“Why should our country lose the benefit of foreign direct investment in this sector by saying that we will not allow Islamic banking? When our Prime Minister visited Malaysia, he said that India will send a team of RBI officials to Malaysia to study Islamic banking aspects. I am sure that there will be a necessary regulation in place,” Mr L. Nageswara Rao, counsel for the Kerala Government in the Islamic banking case, said.

According to experts, no financial institution that practices Islamic banking looked for bailout packages during the global recession.

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