Minority commission backs Islamic banking
By Rizwan Khatik - Mon Jun 04, 1:57 pm
Mumbai: The long-standing debate on whether India should allow Islamic banking has taken a twist with the National Commission for Minorities, or NCM, stepping into the picture and strongly supporting the model in Asia’s third-largest economy.
Following a proposal from NCM to permit interest-free banking a variant of Islamic banking the finance ministry has asked the Reserve Bank of India (RBI) to take a fresh look at the matter. Until now, the central bank has maintained Islamic banking is not feasible in India as existing regulations do not permit interest-free transactions.
Seeing benefits: National Commission for Minorities chairperson Wajahat Habibullah says the interest-free model will help the country to channelize more funds from the Muslim business community abroad. The minority commission, a constitutional body headed by the former chief information commissioner of India, Wajahat Habibullah, has sought an amendment to the banking regulations to open the doors for interest-free banking in the country.
This is the first time the commission has got itself directly involved in the matter. The commission recently met top finance ministry officials including Sunil Soni, additional secretary, financial services, and Alok Nigam, joint secretary, on the matter.
Since Islamic banking is not allowed in India under current norms, “there should, therefore, be a possibility of permitting interest-free banking by amending the regulations,” Habibullah said, according to a recorded note of the meeting, reviewed by Mint.
According to the note, the finance ministry is open to the possibility of allowing some nationalized banks and non-banking financial companies (NBFCs) to open accounts that will offer interest-free products. “Interest-free banking should not be associated with the religion.
It is not in violations of any rules, though the current regulations have to be amended to make this model available in India,” Habibullah said.