‘Islamic banking laws will not affect financial system’
The Indian banking system is losing a staggering Rs 2-3 lakh crore annually, due to the delay in introducing Islamic banking laws (IBLs), analysts say.
Though Muslim parliamentarians have taken up the issue with Prime Minister Manmohan Singh and the UPA chairperson Sonia Gandhi, the Reserve Bank of India is yet to take any concrete action on introduction of IBLs.
In their presentations, the Muslim Parliamentarians have underlined that Islamic banking can be easily introduced without disturbing the basic fabric of Indian financial system.
K Rehman Khan, deputy chairman of Rajya Sabha, said that products similar to mutual funds can be introduced in line with the fundamentals of Islamic banking laws, which do not recognise interest-based banking.
However, Islamic banking laws are based on trading and thereby sharing of profit. Khan added that once the system is recognised, savings of the Muslim comumity would only make Indian banking richer and stronger.
Globally, the financial system has a corpus of about $700 billion under the Islamic banking system. Banks like HSBC and Lloyds TSB have Shariah compliant units to bring the Muslim community into the banking system.
It is learnt that several leading Indian banks like ICICI Bank are looking at various ways of introducing Islamic banking products without disturbing the fabric of Indian banking system.
"The Islamic banking system does not recognise interest-based transaction but the main element of profit is not eliminated from the system," Mr Khan said, adding that there is no reason why India cannot implement the Islamic banking system, especially as most other western countries like the UK have recognised the system.
Earlier, the Muslim leaders had proposed setting up of a non-banking finance company in line with Malaysia’s Tabung Haji for the large Muslim population in the country. Meanwhile, several banks from West Asian countries have evinced interest in entering India.
