Malegaon: In an important development for
interest-free banking in India, the UPA Government at the centre has come forward to save the initiatives taken by the Kerala
Government to establish a financial institution in line with Islamic
The proposal was in
doldrums after the High Court in Kerala stayed the activities of
Kerala State Industrial Development Corporation (KSIDC) which was
working to establish first interest-free bank of the country in
However, according to a
report published in Mail-Today, the UPA Government has
offered a helping hand to Kerala in revoking a stay order by the
state high court against setting up of an Islamic bank.
"The Centre would
coordinate with the state government in dealing with the issue
legally" , Mail-Today quoted Minister of Minority
Affairs Salman Khurshid as saying who
also noted that the court order could hamper investment
opportunities in the country.
Salman Khurshid was
peaking at the editors’ conference on social sector issues on
“A lot of other
countries are snatching investment from Islamic countries. The
country is being deprived of such funds for the lack of an Islamic
banking system", Mail-Today quoted Salman Khurshid.
He said the high court
would be informed of the Centre’s stand on the matter. “ I think the
finance ministry will deal with the matter,” he told the gathering.
He said, if needed, the banking norms should be amended to comply
with the Islamic banking system.
The Kerala government
cleared the project after a feasibility study found that Islamic
bank was a viable proposition in Kerala. A company was also
registered to take the process forward. The share capital of the
proposed bank had been fixed at Rs 1,000 crore.
According to the
Islamic banking concept, the bank will not pay any interest to
customers. A Sharia board can decide what sort of investments the
bank can make. The bank will also have Sharia - compliant banking
Profits made out of the
investments will be distributed to shareholders.
Convener of National
Committee on Islamic Banking H. Abdur Raqeeb had met Khurshid last
June on the feasibility of interest- free Islamic banking in India.
“ Islamic banking will
be beneficial for the marginalised and the minorities in terms of
microfinance. Major investment from the Gulf countries could also be
attracted,” Raqeeb said.
He said if
London, Singapore, Tokyo and Hong Kong can become “ hub and
house of Islamic Finance & Banking”, Mumbai and Kochi can also
Khurshid also said the
Centre preferred a cautious approach on the issue of reservation for
“ Our manifesto is
clear on this. We will apply Karnataka- Tamil Nadu model, which says
backward among Muslims should get reservation, according to their
population,” Mail-Today quoted the Minority Affairs Minister
Salman Khurshid as saying.