Interest-free banking windows urged at Indian banks in Gulf

JEDDAH: The Indian Forum for Interest-Free Banking (IFIB) has called upon Prime Minister Manmohan Singh to take quick measures for opening interest-free banking windows at Indian banks in Saudi Arabia and other Gulf countries.
Officials of the Jeddah-based forum told reporters that IFIB would present a memorandum to the prime minister in this respect during the Emerging Kerala Investment Forum that opens in Kochi on Wednesday.
They said a substantial number of Indian workers in Saudi Arabia and other countries wish to invest their hard-earned money on a profit-sharing basis rather than an interest basis.
“We would therefore request Your Excellency to facilitate the introduction of profit-based financial intermediaries in India and in foreign branches of Indian banks,” read the memorandum, which will be presented to the premier by V.K. Abdul Aziz, secretary-general of the forum, in the presence of other community leaders.
Currently money is kept in banks as “savings deposits” due to the lack of such an alternative banking system in India. The money thus remains idle for a long time and when taken to India, it is mostly spent on non-productive areas such as gold and virgin lands.
Singh, who is a world-renowned economist, spoke in favor of Islamic banking during his visits to Malaysia and Qatar in 2010. He said India was seeking billions of dollars in investment from the Gulf for its huge infrastructure projects.
“Encouraged by this, we, in Saudi Arabia, have arranged a series of meetings to enhance public awareness about the possibility of mobilizing investments from the Middle East. Our feedback is that if interest-free banking was allowed in India, it would pass on a strong message to the whole region that India is open to investment on Shariah principles, thus creating an environment for the Middle East-based private/sovereign funds to take advantage of the opportunity,” an IFIB official said.
A number of secular democratic countries like the UK, the United States, Singapore, Japan, Australia and France have already introduced financial intermediation based on Shariah principles. Interest-free banking and finance are functioning models in more than 75 countries around the globe with its assets exceeding $ 1.6 trillion.
The Financial Reforms Committee, headed by Raghuram Rajan (appointed by the Planning Commission of India), had asked the government to consider interest-free finance as a way to achieve inclusive banking. “Despite these developments no serious effort has been made in India for the introduction of Shariah-compliant financial intermediaries,” the memorandum read. Rajan is now adviser to Indian Finance Minister P. Chidambaram.
IFIB’s Jeddah Chapter organized a special meeting and press conference at Seagull’s Restaurant on Thursday to highlight the importance of introducing interest-free banking in India. The meeting decided to present the memorandum to the prime minister and present a concept paper on the subject at the Kochi forum. It also decided to organize a seminar in Jeddah to create public awareness on the topic.
A press conference has been arranged in Kochi as part of IFIB’s efforts to promote interest-free finance in India. Experts such as K.A. Najmi, former adviser to Reserve Bank of India; O.P.R. Kutty, former regional financial controller of AA Turki Group; H. Abdul Raqeeb, secretary-general of the Indian Center for Islamic Finance, New Delhi; and Thanveer Mohiyudeen, president of the Chartered Professionals for Islamic Finance, will address the conference.