Dubai: Islamic banking may be in for some windfall gains if a reported move by Indian authorities to introduce some form of interest-free banking, aimed at bringing the country’s unbanked Muslim populations into mainstream banking, bears fruit.
If the initiative is taken to its logical conclusion, the Indian banking sector too stands to gain significantly as it will add huge numbers of new customers, while opening up a channel for substantial fund flow from regions such as the Gulf.
The Indian banking sector, which grabbed international news headlines last week, although for the wrong reasons — a nation-wide strike by employees of public sector banks and figuring in the controversy centering on Iran sanctions-related breaches by some international banking majors — however, provided some clues to the outside world about the kind of clout it enjoys in terms of customer base and business volumes.
Over a million employees of public sector banks went on a two-day strike protesting against possible financial reforms that might open up the banking sector to foreign ownership beyond the current ceiling of 20 per cent, which the employees feel will dilute their bargaining power and benefits. Given that public sector banks account for only 70 per cent of the overall banking sector, the country’s bank employee population is roughly of the same size as the population of Qatar. That should give an idea about the size of India’s banking sector.