Indian Finance Minister Mr. Pranab
Mukherjee has assured a delegation
of Indian Centre for Islamic Finance
(ICIF) that he would soon discuss
the feasibility of introducing an
interest-free Islamic banking system in
the country with RBI governor.
“Our talks with
Mukherjee were very positive. He has
taken note of the major points in our
memorandum and promised to have detailed
talks on the topic later. I am now very
optimistic about Islamic banking in
India after the talks,” said H. Abdur
Raqeeb, general-secretary of ICIF who
led the delegation.
Indian Finance Minister Pranab Mukherjee
with H. Abdur Raqeeb and other ICIF
the finance minister had informed him that he would
meet the RBI governor next week and that he would
discuss the matter with him. “The minister also told
me that he would be visiting Saudi Arabia shortly
and would be available in the second week of
November and then a meeting could be arranged for
ICIF to interact with the secretaries and officials
of the ministry’s banking department,” he added.
Raqeeb said the minister was impressed when informed
that Islamic banking would benefit not only Muslims
but also non-Muslims in the country. “About 40
percent of the clients of Islamic banks in Malaysia
and 20 percent in Britain are non-Muslim,” he said.
The Vatican has recommended Islamic finance because
of its emphasis on ethical and socially responsible
The delegation also briefed Mukherjee on the Kerala
government’s decision to launch an Islamic
investment company with a capital of Rs.10 billion
following a feasibility study conducted by Ernst &
Young. The company could be developed into a global
Islamic bank at a later stage with RBI’s consent.
The Finance Minister went through the three-page
ICIF memorandum and keenly read the recommendations
of Raghuram Rajan Committee on Financial Sector
Reforms. The Committee had advised the government to
take measures to permit the delivery of
interest-free finance on a larger scale, including
through the banking system.
The delegation convinced the minister that the
introduction of Islamic banking and finance would
help India attract huge funds in investments from
oil-rich Gulf countries. It will also encourage many
Muslims, who avoid dealing with interest because of
religious instructions, to invest their money.
“In India billions of rupees earned in interest are
kept in suspended accounts, as believers do not
claim it,” Raqeeb said quoting an RBI journal
report. “The assets controlled by Muslims are
estimated at $1.5 trillion and growing at 15 percent
a year,” the journal said. In Kerala alone it is
reported that this money could reach more than Rs
The delegation urged the Reserve Bank to allow
Islamic banking/products through subsidiaries of
banks and amend the BR Act/RBI Act by way of
insertion of a separate chapter exclusively dealing
with all aspects of Islamic banking
It also called for the setting up of Bharatiya
Interest-Free Banking Company and a National
Interest-Free Banking Corporation.
Meanwhile, the Indian Friends Circle in Riyadh said
they were intending to present a similar memorandum
to Mukherjee during his visit to Riyadh to consider
Islamic banking as an alternate financial channel.
"As an experiment a Shariah-compliant fund can be
started at State Bank of India's Jeddah branch," the
circle said in a letter to the minister.
"As Saudi Arabia has a large NRI base, of which many
are followers of Islam and would like to invest
their hard-earned money in financial schemes that
are based on Islamic faith," said Ahmed Ali, its
president. "This wealth can be used to enhance the
economy of India," he said, adding that a copy of
the letter has been presented to the Indian Embassy