Islamic banking may turn reality

The Reserve Bank of India’s proposal to tap Islamic banking to provide banking services to Muslims - who are averse to a interest-based model, has raised hope of this system becoming a reality in the near distant future.

According to Dr D.K. Batra, marketing professor, IMI, New Delhi, a large section of Muslims in India did not access banking services on religious grounds due to the element of interest which is prohibited in Islam. So it is interesting that “RBI will explore the opportunity to offer interest-free banking in consultation with the government to open Islamic banks,” he said. This requires a law to be passed, and therefore legislative support, since it concerns net interest margin for banks. The Islamic finance has not grown fast enough as the concept faced opposition from political parties, said Dr Batra.
Mr M.H. Khatkhatay, director, Tasis, Taqwaa advisor, Sharia Investment Solutions, said “The Islamic banking has been working in nearly 100 countries including China, Sri Lanka, Europe, Indonesia etc. Islamic products exist in India and “we are structuring a product for the financial arm of a multinational FMCG company.” Mr Khatkhatay says most students are non-Muslims. According to him, “Islamic banking has nothing to do with religion. So non-Muslims, especially the Jains also invest in sharia compliant funds like Tata Ethical Fund, which does not invest in companies that deal in prohibited items. In fact, the Muslims make up just 30 per cent of the total investors in such Sharia compliant funds,” Mr Khatkhatay explained.