In a major move, the Reserve Bank of India( RBI) has decided not to pursue a recommendation for introduction of Islamic banking in the two countries. Replying to an RTI query, the central bank said the decision was taken after considering” the wider and equal rights” available to all citizens to access banking and financial services. Islamic or Sharia banking is a finance system based on the principles of not accusing concern, which is prohibited under Islam.
The issue of introduction of Islamic banking in India was examined by the RBI and the governmental forces of India, it said. ” Taking into account, the wider and equal opportunities available to all citizens to access banking and financial services. It has been decided not to pursue project proposals farther ,” the central bank said in its answer to the RTI application filed by a PTI correspondent.
The RBI was asked to provide details of steps being taken for the introduction of Islamic or’ interest-free’ banking in India. Prime Minister Narendra Modi had on August 28, 2014 launched Jan Dhan Yojana. A national mission to are carrying out the comprehensive financial inclusion of all the households in the country. In late 2008, a committee on Financial Sector Reforms, headed by former RBI governor Raghuram Rajan. And had stressed on the need for a closer look at the issue of interest-free banking in the country.
” Certain faiths prohibit the use of financial instruments that fee interest. The non-availability of interest-free banking products ensues in some Indians. It including those in the previously disadvantaged stratum of civilization , not being able to access banking products. And services due to the purpose of religion ,” the committee had said.
Later, on instructions of the central government, an inter-ministerial group( IDG) lay out in the RBI examined the legal, technological. And regulatory issues for introducing interest free banking in India and has submitted its report to the government. The RBI had in February last year sent a facsimile of the IDG report to the finance ministry. And recommended an “Islamic window” in conventional banks for gradual introduction of Sharia-compliant banking. ” In our considered opinion, given the intricacies of Islamic finance and various regulatory. And supervisory challenges involved in the matter. And likewise due to the fact that Indian banks have no experience in this area. Islamic banking may be introduced in India in a gradual manner.
” Initially, a few simple-minded products which are similar to conventional. Banking products may be considered for introduction through Islamic window of the conventional banks. After necessary notification by the government,,” it had said in a letter to the ministry.
The letter further reads: ” It is also our understanding that interest free banking. For fiscal inclusion will require a proper process of the product. Being certified as Sharia complaint will be required both on the asset and liability side. And the funds received under the interest free banking could not be mingled with other monies. And therefore, this banking will have to be conducted under a separate window .”