RBI approval for Cheraman to boost inclusive growth

Updated 20 August 2013
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RBI approval for Cheraman to boost inclusive growth

Indian and international Islamic banking experts have welcomed Reserve Bank of India’s decision allowing operation of an interest-free non-banking financial company (NBFC) in Kerala, saying it would encourage the country’s 200-million-strong Muslims to participate in the country’s development projects.
“It will have a big impact on the Indian economy and contribute to the expansion of Islamic banking and finance worldwide,” said Mohammed Azmi Omar, director general of the Islamic Research & Training Institute, an affiliate of Islamic Development Bank.
Cheraman Financial Services, based in Kerala's city of Kochi, plans to offer leasing and equity-finance products under Islamic principles. It said it had obtained approval to operate from the Reserve Bank of India and would follow the Islamic ban on interest; it will not take deposits from customers. Cheraman plans to roll out its products by the end of August.
“India has one of the world’s largest Muslim population and the RBI decision would help tap huge funds of these Muslims for Shariah-compliant investment projects,” Omar told Arab News. Islamic finance promotes inclusive growth and accelerates development of real economy, he added.
The RBI decision appears to open the door to the possibility of more NBFCs offering non-interest products in future, even though full-fledged Islamic banks are expected to remain banned.
Last year, the RBI directed Kochi-based Alternative Investments and Credits Ltd. (AICL) to stop its non-interest NBFC business almost a decade after the firm was launched. This prompted an ongoing legal challenge by AICL.
"The grant of an NBFC license should have an impact on the AICL proceedings and there are good chances that the matter may get settled soon," said Suprio Bose, Mumbai-based lawyer at Juris Corp., a law firm which previously represented AICL.
"The event reflects a significant and welcome change in RBI's attitude toward Shariah-based NBFCs and sets a precedent for others to follow suit."
However, many analysts think that unless and until full-fledged Islamic banks are permitted in India, an Islamic finance sector will find it hard to develop.
"I don't think there is going to be a rush for NBFC applications. RBI's attitude toward the Shariah-compliance concept is yet to be tested," said Shariq Nisar, director of research and operations at Mumbai-based Taqwaa Advisory and Shariah Investment Solutions.
According to central bank data, credit extended to NBFCs increased by 1.9 percent from a year earlier in June, compared with an increase of 43.9 percent in June last year. There are over 12,000 registered NBFCs in India.
“The RBI’s welcome decision will boost inclusive growth of the marginalized and the minorities,” said H. Abdur Raqeeb, convenor, National Committee on Islamic Banking, and general secretary, Indian Centre for Islamic Finance (ICIF)
Raqeeb said the interest-free financial system would benefit not only Muslims but also non-Muslims, adding that thousands of non-Muslims in Malaysia, UK, Singapore and other countries are its beneficiaries.
V.K. Abdul Aziz, secretary-general of Indian Forum for Interest-free Banking, also welcomed the RBI decision. “The fundamental objective of the interest-free banking system is to eliminate exploitation of borrowers. It considers lending as an investment and distributes investment risk between the users and suppliers of funds,” Aziz told Arab News. The system will also help eliminate poverty in the country, boost small and medium enterprises, and create more job opportunities, he added.


Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

Updated 14 December 2018
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Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

  • Ransom payment would set dangerous precedent
  • NOC declared force majeure on exports on Monday

BENGHAZI: Libya’s state-owned National Oil Corp. (NOC) said it was against paying a ransom to an armed group that has halted crude production at the country’s largest oilfield.
“Any attempt to pay a ransom to the armed militia which shut down El Sharara (oilfield) would set a dangerous precedent that would threaten the recovery of the Libyan economy,” NOC Chairman Mustafa Sanalla said in a statement on the company’s website.
NOC on Monday declared force majeure on exports from the 315,000-barrels-per-day oilfield after it was seized at the weekend by a local militia group.
The nearby El-Feel oilfield, which uses the same power supply as El Sharara, was still producing normally, a spokesman for NOC said, without giving an output figure. The field usually pumps around 70,000 bpd.
Since 2013 Libya has faced a wave of blockages of oilfields and export terminals by armed groups and civilians trying to press the country’s weak state into concessions.
Officials have tended to end such action by paying off protesters who demand to be added to the public payroll.
At El Sharara, in southern Libya, a mix of state-paid guards, civilians and tribesmen have occupied the field, camping there since Saturday, protesters and oil workers said. The protesters work in shifts, with some going home at night.
NOC has evacuated some staff by plane, engineers at the oilfield said. A number of sub-stations away from the main field have been vacated and equipment removed.
The occupiers are divided, with members of the Petroleum Facilities Guard (PFG) indicating they would end the blockade in return for a quick cash payment, oil workers say. The PFG has demanded more men be added to the public payroll.
The tribesmen have asked for long-term development funds, which might take time.
Libya is run by two competing, weak governments. Armed groups, tribesmen and normal Libyans tend to vent their anger about high inflation and a lack of infrastructure on the NOC, which they see as a cash cow booking billions of dollars in oil and gas revenues annually.