KL NEWS NETWORK
Responding to the appeal made by the Reserve Bank of India on Dec 28th 2015, to the concerned entities for suggestions, when it released its report of the ‘Committee on Medium-term path for Financial Inclusion’, headed by Deepak Mohanty, IBK-Islamic Banking Kashmir (A Research, Advocacy & Awareness group) wrote to the Principal Chief General Manager of the RBI’s Financial Inclusion & Development Department, Mumbai.
While appreciating the recommendation of the said committee to have ‘Special windows’ for Interest-Free banking within conventional banks, a statement issued by IBK said, IBK Chairperson Mehboob Makhdoomi suggested that since the state of Jammu & Kashmir has a distinction of being the only Muslim-majority state, “it, therefore is a natural testing laboratory for Interest-Free finance & banking, and that the first Interest-free window should be set up in one of the banks of J&K, which can then serve as a prototype for other states.”
“This is not to say that ‘Interest-Free banking’ is limited to Muslims alone, as we have seen in Malaysia that 40% lenders and 60% borrowers are Non-Muslims, who consider it be ethical, if not religious, thus growing their society on mutual dependence & diminishing disparity,” Makdoomi writes in the letter, “however, in India where it’s a new concept, Muslims shall certainly be its first users due to the reasons of their faith, which prohibits them to deal with Interest, as already pointed out by Dr Raghu Ram Rajan (Governor RBI) in his CFSR (Committee for Financial Sector Reforms Report) in the year 2008.”
The letter further reads that (IBK) is doing a “verifiable Survey in J&K”, “with an aim to find out the percentage of people ,who would use Interest-Free financial products/services”. “Should it become a reality,” the statement said, “and that they shall come up with a comprehensive report on the ‘Potential of Interest-Free banking in J&K’.”
“The other two ways of introducing Islamic finance are a Stand-alone Islamic bank and an NBFC( Non-Banking Financial Corporation), both of which require huge infrastructure, which is what makes a ‘Special Interest-Free window’ within conventional bank, a feasible option to begin with,” letter adds. “It must be noted that the report of RBI committee has a full chapter (Ch. no. 5) on Interest-Free banking.”