By Ghulam Muhammed, Mumbai
proposal for joint ventures in islamic banking in collaboration with international islamic banks and/or international banks with islamic banking operational expertise
Financial Sector Reforms are needed, as per Mr. Raghuram G. Rajan’s introductory remarks, to
bring into banking fold, all those who are still out of the ambit of Indian banking, either as small and unsecured borrowers that form the bulk of the lower strata of our economy, or to mobilize funds from some sectors, who find current banking service lacking the structural flexibility to meet their special requirements.
In this later category, Indian Muslims, whose aggregate population percentage is around 15 percent of the total population of India, form, by far the bigger chunk that have escaped the services provided by Indian banking industry, be that the nationalized banks, cooperative sectors or other para-banking sectors.
Many an attempts by social minded people had failed, with huge losses in community funds, in the last sixty years of India’s independent history, mainly because of the rigid and unbending attitude of the bureaucrats and technocrats that unfortunately characterized the pre-liberalisation phase of the economy.
Now, over the years, while India was cut off from sweeping developments in the international banking and investment arena in several financial sectors due to its closed economy, new vistas that were opened and honed to form a highly successful and stable Islamic banking system too was out of bounds for Indians at large and Indian Muslims in particular.
Credit must therefore be given to the new spirit of liberalization and a strong commitment to redress any anomalies in banking’s structural rigidities, so that the largely neglected sector of Indian economy should be brought in to thrive with the rest.
Islamic Banking world over has become a respectable industry that massively and positively contributes to world economy. India should be ready to tap all resources available to expedite measures to cut out the long gestation period that may hamper early and sure-footed introduction of Islamic Banking into India, by opening the doors to established foreign Islamic Banks in the same manner that it has opened the doors to all manner of foreign investment and expertise, be that of technical or financial nature.
I propose that a programme should be thrashed out in consultation with a group or consortium of foreign Islamic banks, to see that special products and services that are the hallmark of Islamic banking, should be expeditiously and safely introduced in India, primarily with a view to cater to the specialized needs of Indian Muslims. Since the word ‘Islamic Banking’ is now a generic name, it should not be seen as something non-secular and against the ethos of Indian constitution. Islamic Banking’s pros and cons should be judged on merits. On the other hand the very brand name of ISLAMIC BANKING is enough to get tremendous response from Muslim depositors, investors, traders and prospective borrowers — even without any expensive marketing effort. The market is already there to be readily tapped.
In an open economy like the Arabian Gulf countries, newly established nationalized banks invariably hired the services of reputed international banks, to run their back office operations. The management contracts signed by local banks were merely to ensure that their local lack of expertise in banking and investments may not result in banking failures from the very outset.
While in the gulf, my two projects, forming two joint-ventures with Habib Bank Zurich (lasting 25 years) and Canara Bank (lasting 8 years), though of limited nature, where management contracts were given to the outsied banks to bring in their own expert staff and take over the full management of the organisations, has encouraged me to visualise such joint-ventures between banks in India and other nations, who can offer their full technical and management expertise to Indian banks, or non-banking financial organisations with joint investments of local and foreign percentages. All manner of combination and permutations can be considered with open mind. Only a right frame of mind to experiment and venture into uncharted fields, with full caution and deliberations, of course, would bring in swift changes in Indian banking and investment sectors. We will not waste valuable time, energies and resources, while trying to reinvent the wheel.
I wish you all the best wishes and Godspeed in the committee’s robust search for ways and means to care and nourish all sectors of national economy so that future growth of India, may not fall prey to unsavory developments given the ever-present danger of huge pockets of poverty bedeviling the planners of the nations.
Regards