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Tuesday, 30 July 2013

Islamic banking in India

Around four decades ago, banking industry started to realize the benefits of ‘Fiqh- al Muamalat’ (transaction rules) of Shariah law. It began showing steady growth right from its inception at around 15% a year. Today Islamic investments & finance institutions make the largest growing sector in this industry, with staggering 25% growth every year, notwithstanding economic-meltdown of the US & other recessions in the world economy.

Islamic banking has been adopted by more than 50 countries, including the United States & Great Britain. And it is certainly not to cater to any vote-bank, since Muslims in these countries do not constitute any sizeable enough population to be considered for political appeasement. It is purely on the basis of the fact that Islamic banking offers a solution, a recession-proof future to these countries which live on credit. However, it bewilders me to see India, the third largest Muslim populated nation in the world, with almost 200 million Muslims in it, not even indulged in any serious debate about this new trend. The Reserve bank of India's governor, D. Subbarao, recently issued a statement, ''We got to see that Islamic Banking which does not allow charging interest or taking of interest is inconsistent with our existing laws. All that I am saying is Islamic banking is not consistent with current banking laws". The reason is quite evident. Even as per him, any Islamic banking institution has to be under the purview of Shariah regulations, calling for a Shariah court to act as the regulatory authority over it. Currently, all the banking & financial institutions in India have only RBI as their regulatory authority. 

So, to conclude, for Islamic banking to be possible in India, there have to be two regulatory agencies on the same institution, ‘RBI’ for banking regulation & ‘Shariah court’ as the regulator for Islamic banking. The Governor was very clear that it is the Government which has to decide if they want to allow Islamic banking or not. So, it is not what many of my dear economists in India opine, that Islamic banking is just not possible in India. The complete truth is that it can be made possible if government agrees to allow it. India is not a theocratic country that its laws are decreed by God. If the country benefits and its Muslim citizens religious obligation is served, why can not amendments to the current law be made, the way many Western and 'not-so-Islamic' countries have done? If some fascists oppose it on the basis of its affiliation with Islam, let them call it an 'Interest-free banking'.

‘All India Muslim Personal Board’, boasts of safeguarding the religious rights of Indian Muslims, on its website. Undeniably, it has achieved some commendable milestones. The irony is that it has exhausted all its efforts to resist 'Child marriage Restraint Act' to ensure legality of such marriages. Their argument is that since there is no age- bar set up by Islam on marriage, hence country cannot set it up for them, which makes sense to me. However, what about the Interest (Riba or usury), which is unambiguously forbidden in Islam, where as per one hadith, Allah & His prophet (SAW) declare a war against such a Muslim. Why is their ante so low on it? Comparatively, this issue deserves the most attention. Clearly, more than AIMPB's resistance to 'Right of children for free education act, 2009' and their rightful opposition to Salman Rushdie's video conference to Jaipur literature festival.

At the state-level, JK bank being the leading financial institution here and catering to the only Muslim majority state in India, must realize this moral responsibility of strongly pleading for this religious right of its Muslim customers, so that they have an option to choose from. They must not just issue press statements, but connect with all those who are interested, like the Govt of Kerala & AIMPB to form a pressure group, as Governments do not do anything unless its people convey their demands, 

effectively & efficiently. This step will not just win Muslim voters for the government, if they permit it, but non-Muslims as well, since this is not just to cater to the religious rights of minority but also a chance to bail out India from precarious economic situation.

(Mehboob Makhdoomi has an M.B.A from USA & a research degree from the U.K. His book, ‘Social Marketing & Conflict Resolution: An analysis of the Kashmir situation’, is set to be released this August in Kashmir.)

(Greater Kashmir / 30 July 2013)

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