India needs to re-examine stand on Islamic banking: Experts

“The Reserve Bank of India should re-examine its stand on Islamic finance and can set up an internal working group,” said Vijay Mahajan,managing director,Basix,at the workshop on Saturday.

Experts say awareness must be created to debunk the myth that Islamic finance is only for Muslims.

“In countries where Islamic finance has been allowed,it has attracted both Muslims and members of other faiths because it is seen as encouraging ethical and socially responsible investments. In Malaysia,for instance,over 40 per cent investors and 60 per cent borrowers are non-Muslims. A committee on financial sector reforms of the Planning Commission of India (2008) had recommended interest free finance and banking to be introduced in the main banking sector for growth with inclusion and innovation,” said H Abdur Raqeeb,general secretary of Indian Centre for Islamic Finance and convener of National Committee on Islamic Banking.

He said according to the Sachar Committee report,banking sector has categorised Muslims and Muslim dominated areas as “negative zone”. “This exclusion is partly due to reasons of their faith,interest being not permitted. If London,Paris,Hong Kong,and Singapore can become hub of Islamic banking,why not India?” Raqeeb said.

Experts suggested the name can be changed to alternate finance or participatory banking or interest free finance and banking,while following the same principles of Shariah.

“Participatory banking in India includes cooperative banks,non-banking financial institutions and micro-credit programmes etc. We need to pitch Islamic banking within the framework of participatory banking in India which will involve profit and loss sharing arrangements with no fixed or predetermined interest rate and investment banking with no fixed or prefixed return rate. There are valid reasons to use Islamic finance as an alternative mode,” said Abusaleh Shariff,chief economist at the National Council of Applied Economic Research and Sachar Committee member.

He said there is an urgent need to identify hotspots where lot of entrepreneurial activity is taking place where Muslims are involved and efforts need to taken to organise this labour. “We (Muslims) need to mainstream ourselves and partner India’s growth,” he added.

Syed Alauddin,vice-president of Multigain Shariah Financial Services,said there is an immediate need to bridge the gap between Shariah and market dynamics.

Further,Anjani Sinha,managing director of National Spot Exchange,said lack of a central regulatory body and limited number of Shariah experts are challenges before Islamic finance.