Finance Ministry briefed on prospects of Islamic banking in India

By TCN News,

New Delhi: As part of their continued, tireless efforts to convince concerned Indian authorities and institutions for allowing Islamic banking and finance system in the country, a high-level delegation of Indian Centre for Islamic Finance (ICIF), New Delhi called on Mr Shashi Kant Sharma, Secretary (Financial Services) under whom the banking sector of the country is operated to discuss the need and relevance of Islamic Finance in India.

The delegation consisted of Mr Muddassir Siddiqi, a Shariah scholar and US-trained attorney, Mr Khurshid Najmi, former joint legal advisor, RBI and Partner, India Law Services, New Delhi, and Mr H Abdur Raqeeb, General Secretary, ICIF and Convener, National Committee on Islamic Banking.

Mr Siddqi explained to Mr Sharma and Mr Alok Nigam, IAS, Joint Secretary, Department of Financial Services how Islamic finance has emerged as a viable source of financing in a number of modern, secular and industrialized countries such as the United Kingdom, Japan, Singapore, France and Hongkong and even in China recently where Islamic Financial institutions have been allowed to operate by incorporating some changes in local banking and tax laws in order that they may provide financing on a level playing field with conventional financiers.

Mr Siddiqi, who is a scholar from the early batch of scholars from the world renowned Islamic University of Medina, KSA, cited the example of UK where the largest number of legislative changes in their banking and tax law system without using such terms as the Shariah or Islamic in their legislation, thereby equally utilized by any entity, regardless of its faith. He also said that a large number of consumers of Islamic financial products (particularly Sukuk) have come from the conventional world.

Referring to the report of the Working Group of RBI on the feasibility of Islamic banking instruments in India by Mr Anand Sinha, he placed before the secretary of the finance ministry that the report is fair and accurate when it describes the objectives, goals and traditional Islamic contracts written by early Muslim jurists more than 1000 years ago. As the member of the Shariah Standard Committee of the Accounting and Auditing Organisation for Islamic Financial Institutions — AAoIFI of Bahrain, he presented the AAoIFI standards to show the model Islamic finance contracts that are not the same as the traditional contracts as discussed in Sinha Report. Further, copies of the rulings of US Central Bank (OCC) and Financial Service Authority — FSA of UK were submitted to show the approach they have taken to facilitate those contracts.

Both Mr Sharma and Mr Alok Nigam sought some clarifications on Islamic Finance. Mr Muddasir Siddiqi and Mr Najmi explained to them in detail.

Finally Mr Abdur Raqeeb joined Mr Muddassir Siddiqi and suggested Finance Ministry and RBI to appoint a committee to look into all relevant angles and aspects in order to base its conclusions on a full and complete analysis and assured to offer their services by providing the names of the experts who are both familiar with the modern tools of Islamic financing as well as the criteria adopted by many countries in facilitating Islamic finance to serve the committee.

“The patient hearing and the positive, but clear and candid discussion that took place with the topmost officials in charge of banking in the country, it is hoped will take up the matter with RBI and fulfill the task of the dawn of Islamic Finance, which PM Manmohan Singh said in Malaysia few months before that he would ask RBI to look into the example of Malaysia for Islamic finance and banking,” said Mr Raqeeb.