Kuala Lumpur: Prime Minister Manmohan Singh today said the Reserve Bank of India (RBI) should look at Islamic banking practices in Malaysia, in the context of suggestions from some quarters that the central bank should introduce such a system in India.
“There have been from time to time demands for experimenting (with) Islamic banking. I would certainly recommend to the RBI, which is looking into the question, to look at what is happening in Malaysia in this regard,” Dr Singh said, when asked whether India would like to learn something about Islamic banking from Malaysia.
Earlier in the day, the Indian prime minister held wide-ranging talks on economic and strategic issues with his Malaysian counterpart Mohammad Najib Tun Abdul Razak, PTI reports.
There has been pressure on the RBI to introduce Islamic banking, a kind of interest-free banking system, in India. It is felt that this could attract billions of dollars in investments from countries in West Asia.
Today, there are between 400 and 500 Islamic banks worldwide that together managed close to $1 trillion. That figure is expected to swell to $4 trillion by 2020. According to global consultant McKenzie, the investment surplus in West Asia is expected to be around $9 trillion by 2020. Currently, it is about $1.5 trillion.
Earlier this month, Muddassir Siddiqui, partner and head of Islamic finance, Middle East, SNR Denton, said India should be open to interest free banking through banks as a pilot project. “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,” Siddiqui had said, on a visit to India.
The judiciary, it seems, is not favourably disposed to Islamic banking. In one instance, in April this year, the Kerala High court directed the state government and its institutions not to participate financially or otherwise in a financial company modelled on the lines of an Islamic bank.
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