Jeddah-based group lobbies for interest-free banking in India

The Jeddah-based Indian Forum for Interest-Free Banking has urged Prime Minister Manmohan Singh to clear huddles for granting license for Shariah-compliant banks and financial institutions to operate in India.
In a petition submitted to the prime minister at the Emerging Kerala Global Connect, a biennial summit of investors and policymakers, held in the southern port city of Kochi last week, they said it would open floodgates infrastructural funding for India.
Islamic banking assets are estimated at more than $ 1.5 trillion worldwide and it is operational in 52 countries, including the US, UK, Australia, France, Singapore, Japan and China.
According to the latest report of the State-Level Banking Committee, the overseas remittances in Kerala banks alone jumped 30.7 percent in the first quarter of the current fiscal year when total deposits were 556.6 billion rupees against 385.56 billion rupees during the same period in 2011.
According to the officials of the group, many expatriates prefer not to claim interest on their bank deposits for reasons of faith and these funds lie idle in banks due to lack of attractive investment opportunities. In fact, it offers a major option for infrastructure funding, a strong catalyst for accelerating India's economic growth.
“The major hurdle before such investments is the Reserve Bank of India's regulations in which interest-free investment has no role. In order to boost the Kerala economy, the government should explore possibilities of such participatory finance ventures from overseas,” said V.K. Abdul Aziz, the group's secretary-general.
Aziz, along with K.T. Muneer, a member of its executive committee and the general secretary of Overseas Indian Congress Committee, Saudi Arabia, submitted copies of the representation to Kerala Chief Minister Oommen Chandy and Cabinet ministers P.K. Kunhalikutty and K.C. Joseph.
Aziz said Indian Contract Act allows citizens to enter a contract in accordance with interest-free economics and it is possible to cover all Shariah-compliant contractual obligations under the act. The parties are at complete liberty to structure it accordingly.
“If Kerala decides to open its doors to an interest-free economy, it would go a long way in creating a suitable environment for investment and facilitate Shariah-compliant investment in various sectors including infrastructure that has potential to change the state's economic scene,” Muneer said.
The lobbyists for Islamic banking operations in India are upbeat after former World Bank economist Raghuram Rajan, a strong votary of Islamic finance who's known for his views in favor of competitiveness instead of protectionism to tide over economic slowdown, took over as India's chief economic adviser recently.