A new proclamation done by Reserve Bank of India (RBI) proposing a opening of an “Islamic window” in required banks for a light introduction of Sharia-compliant or interest-free banking in a country, has led to a extreme discuss on a ethicality of Islamic Banking.
While, a territory wants to transparent Islamic Banking in India, a other wants to dump down a RBI offer as “utter nonsense”, that will inspire Indian Muslims to pierce behind to a Gothic past. To facilitate a term, Islamic Banking is a Sharia-compliant banking complement that prohibits all forms of interest.
But, before debating a pros and cons of Islamic Banking, here is a caveat.
First thing first, during present, there is no doubt of carrying Islamic Banking in India. Simply since as per The Banking Regulation Act, 1949, there can’t be a together banking complement — that doesn’t concede charging of seductiveness — along with a required banking system.
What we need immediately
So, instead of debating a emanate of either or not to have Sharia banking in India, a concentration should be on drumming a outrageous $3 trillion Islamic financial market.
But, before that it needs to be ensured that each Indian Muslim, who earns a provision should have a bank account, that during benefaction is blank to a vast extent.
More numbers of Muslims should get into a regulated banking complement — open accounts, have PAN, record Income Tax Returns, etc.
The immature entrepreneurs should ready viable plan reports and find loans from banks. There are incidences where people unsuccessful to get loans, though it can’t be generalised.
They should proceed RUDSETI (Rural Development and Self Employment Training Institute), that has a footprint in some-more than 500 districts for ability development.
There is adequate for a common male in a complement and a need of a hour is to use it by being a partial of it. All these will assistance Muslim girl to commission themselves and be prepared to be a partial of a tellurian Islamic financial market. Why can’t India be a large actor in it?
How a West took a lead in Islamic Banking
When we speak about Islamic Banking, a initial thing that comes to a mind is that it’s a corner of a Muslim nations and they are a pivotal players. It’s a misconception.
It was a Western universe that recognized a significance and intensity of Islamic finance. Citibank was a initial to set adult a Citi Islamic section in Bahrain in a 1980s. It was followed by HSBC Amanah to set adult a domicile in London, that afterwards shifted a bottom to Dubai and after behind to London. Soon, ABN Amro, Commerz Bank (Germany) and others followed.
Despite it carrying such a outrageous potential, we came to know about Islamic financial usually in 1999 when we was invited and sponsored by Faisal Islamic Bank, Bahrain to attend “Islamic Finance Conference” in London. It non-stop my eyes when we came to know that 75 percent of papers presented there were by non-Muslims, and many of a experts on this theme were from non-Islamic countries.
It’s nothing other than a Harvard University that has been regulating a three-day Islamic Finance Programme each year. we presented a paper on sourroundings adult an Islamic account in a non-Islamic environment, that focused on a aspect that India doesn’t attend in sourroundings adult investment.
One instance can make it transparent how a UK sees a significance of Islamic finance. In 2002, when Gordon Brown was a Chancellor of a Exchequer (UK), a charge force was shaped and a CEO of Barclays Bank, Andrew Buxton suggested ways and tweaked a laws to make a UK a heart for Islamic finance. The subsequent year, in 2003, a initial Islamic Bank of UK was set adult with 5 branches.
It was a large event and I, too, set adult an onshore account in a UK, in that 70 percent subscribers were non-Muslims, with Jews during a top.
Halal Foods — a box in point
Halal code dishes is a ideal instance of how an investment event could be tapped though removing into an neglected discuss on Islam and non-Islam. Barring Muslims, others including Hindus frequency take knowledge to Halal meat. Almost in each restaurants and food joints, it’s a Halal ornithology products that are served. Muslims don’t devour pig and to safeguard that a Muslim consumer gets to eat as per his eremite belief, a Halal code tapped that $6 billion market.
Today, dual Jain sisters from Gujarat have ventured into “Halal” cosmetics — that manufactures cosmetic equipment though regulating animal fat, gelatin or extracts. Same is with Islamic financial — instead of removing into eremite faith and faith, a loyal investment event should be tapped.
Let’s not disgrace Islamic Banking
It was a Jews who initial introduced us to required banking, though do we call it Jewish banking? Islamic Banking is as aged as Islam. Prophet Muhammad, who was an businessman and merchant in his progressing life, was famous as “Sadiq-ul-Amin” — a male who is infallible — since people used to park income with him for safety.
Mudarabah was a initial banking complement in a Islamic world. It’s an Islamic agreement in that one celebration reserve a income and a other provides ability imagination to commence a specific trade. The celebration provision a collateral is called a owners of a capital, whereas, a another celebration is referred to as an representative or businessman who indeed runs a business. It’s also called persperate equity. Here a distinction and detriment are shared, distinct in a benefaction system, where an businessman has to bear a brunt.
Islamic Banking complement died with a arise of colonial power, though a corporate banks in a UK, where bankers were non-Muslims regenerated it.
As per Islam’s elemental element of probity and equality, no seductiveness can be charged on a loan given to a person. One is not authorised to sell debts and make income out of money.
So, instead of job it Islamic Banking and disgrace it with a eremite label, it should be famous as “inclusive banking”.
India: Next Islamic financial destination
In 1998, Dow Jones had set adult Dow Jones Islamic Index and a CEO was a Jew and not a Muslim. There was no Indian association listed on it. And, we had lifted this emanate during a press discussion of Dow Jones in London.
Instead of arguing on Hindu-Muslim, Islamic-non-Islamic issues and looking by a eremite prism, because can’t we be a actor in a $3 trillion Islamic financial market, that is approaching to double by 2020?
Indian Stock Market is a many Sharia agreeable in a universe — some-more than Pakistan, Bangladesh, Malaysia, Turkey or Bahrain. The Bombay Stock Exchange (BSE) already has a training centre for Islamic finance. India needs large investments to account a infra projects, and here Islamic financial can be of use.
As a RBI has spelt out, a Islamic window can offer Mudarabah finance. India can be a heart to yield Islamic financial experts to a world. If Europe, US, China, etc, can benefit a advantage and get collateral by Islamic finance, because can’t India?
(The author is Chancellor of Maulana Azad National Urdu University)
— As told to Debobrat Ghose
For a counter-view on a thought of Islamic Banking in India, review Tarek Fatah’s opinion here
First Published On : Nov 28, 2016 11:48 IST