With an eye on petro dollars, a pitch for Islamic banking

MUMBAI, SEPTEMBER 15 : Jamaat-e-Islami Hind (JIH), one of the leading Muslim organisations based in Delhi, will make a detailed presentation to the Finance Ministry and the RBI on the need to amend the RBI Act and kickstart Islamic banking in India.

“The central bank should allow the Islamic bank to have no-fixed rate regime as Islamic banking is based on participatory, co-operative and investment banking,” said Mohammad Talha, first manager, Qatar International Islamic Bank and one of the speakers of the national seminar on Islamic banking organised by JIH here. The RBI has already set up a working group on Islamic banking headed by Anand Sinha.

“After 9/11, petro dollars are going to Southeast Asia instead of Europe and the US. We aspire to channelise petro dollars to India. If it is allowed, Islamic banks in India with its network in other countries and syndication can facilitate investment by equity funds and high networth individuals in India, which would prefer an Islamic banking set-up,” Talha said, adding that once Islamic Banking is launched in India, it can also help domestic firms raise bonds in West Asia.

A Bahrain-based private equity fund, with a corpus of $1 billion, wants to start a India-specific fund. Also firms like Abu Dhabi Investment, Qatar Investment Authority and Islamic Bank Finance House are looking at investing in India. “Indian Islamic Banks can definitely help channelise these funds properly. Islamic banks can effectively tap property worth billions under the control of Awqaf and Zakat,” opined H. Abdul Raqeeb, member of JIH and convenor of the seminar.

Explaining the working of Islamic bank, Raqeeb said it is a interest-free banking based on Islamic law, Shariah. In this system, the depositor and bank will come to an agreement wherein both the parties will share the profit or losses at the end of the year. The bank will invest in stocks, bonds, infrastructure projects and so on. If the loss arises, the shareholders of the bank will absorb the loss. In the case of lending, the banks will not charge any interest but levy a service charge. Overdrafts are provided, subject to a maximum, free of charge.

“Islamic banking can revolutionise the micro-finance sector in the country and become a boon for the debt-ridden farmers in Maharashtra,” said Dr Ausaf Ahmed, a retired official of Islamic Development Bank, Jeddah.

Commenting on the international scenario, Talha said Islamic banking across the world is...

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