“There have been from time to time demands for experimenting
(with) Islamic banking. I would certainly recommend to RBI, which is looking
into the question, to look at what is happening in Malaysia in this
regard," said Singh, when asked whether India would like to learn
something about Islamic banking from Malaysia.
Singh, who is on an official visit here, earlier held
wide-ranging talks on economic and strategic issues with his Malaysian
counterpart Najib Razak. The two leaders signed six pacts in various fields
like science and technology, IT and health.
Singh invited Malaysian companies, which have good records
in infrastructure, to invest in the sector in India, pointing out that funds to
the tune of $1 trillion would be required over the next seven years and rules
were being relaxed to enable smoother FDI flows.
Singh’s statement on the possible introduction of Islamic
banking in India comes amid growing pressure on the country’s central bank to
introduce the system in order to attract billions of dollars in investments
from Gulf and Middle Eastern countries.
Islamic finance is currently estimated at $1 trillion and
managed by about 400-500 Islamic banks worldwide. By 2020, this figure is
expected to touch $4 trillion. According to projections by global consultant
McKenzie, investment surplus in the West Asian region is expected to be around
$9 trillion by 2020. Currently, the investment surplus is around $1.5 trillion.
Recently, Muddassir Siddqui, partner and head of Islamic
Finance, Middle East, SNR Denton and Company, urged the Indian government to
open interest free banking on a pilot basis.
"We held close interactions with the Finance Ministry
and RBI officials. We hope the ice is breaking. There was no time frame for
setting up Islamic banking. We are hopeful permission would be granted very
soon," Siddqui had said.
Relations between India and Malaysia are set to receive new
impetus with the two countries signing a broad-based trade-opening agreement
and deciding to forge closer cooperation in a range of other areas, including
defense and hydrocarbons.
"The year 2010 is a turning point in the history of
India-Malaysian relations. The understandings and agreements that we reached
today have established a solid foundation for the building of a strategic partnership
and bringing our two peoples together for a better future," Singh told
reporters after talks with Najib.
The Malaysian premier said his country would be happy to
share India's economic success and join its journey for the country’s
development. "We must give new impetus to this relationship. I indicated
to Prime Minister Singh that Malaysia is ready for a deeper and more intensive
relationship," he said.
The two leaders formally announced conclusion of
negotiations on the Comprehensive Economic Cooperation Agreement (CECA), aimed
at enabling freer movement of goods, services and investments. Najib said the
two countries have set a trade target of $15 billion by 2015 and hoped the CECA
would help achieve it.
