India is planning to overhaul regulation of its financial system to attract investments from the Gulf and to encourage its largely unbanked Muslim population to save money in a way compliant with their religion, a senior government adviser has said.
K Rahman Khan, deputy chairman of India's upper house of parliament, told the Financial Times that the ruling Congress party is proposing reforms to the finance ministry, the Reserve Bank of India and Securities and Exchange Board of India to allow for the introduction of Islamic financial services.
"Islamic finance has been growing at a steady pace and it is the most attractive form of alternative [banking] system in the financial sector, it makes no sense for India to exclude itself from this success story," said Mr Khan.
try{document.write(_banner_zone('zone9339')); }catch(e){} India, with more than 150m Muslims, has the world's largest Muslim minority. Many Muslims are discouraged from banking with commercial banks by religious proscriptions against interest. Some are wary of investing to avoid financial involvement with gambling or alcohol companies, according to the Institute of Objective Studies, a research group focusing on the Muslim community.
The southern state of Kerala, which has a large Muslim population and many workers overseas in the Gulf, is backing the launch of a company that would offer Islamic banking services, but its opening has been held up by a legal challenge from a former government official who argues the venture would violate constitutional provisions on religious neutrality.
The Congress party's report, which Mr Khan said had been endorsed by Manmohan Singh, the prime minister, falls short of supporting the creation of a full-fledged Islamic banking sector at a time when regulators are shy of liberalisation.
Mr Khan said that the "main goal at the moment is to help set up non-banking institutions that will allow Indian citizens to save and invest in a sharia-compliant manner and to attract foreign direct investment from the Gulf...At a later stage we will be looking into setting up Islamic banking."
Some western and emerging economies are taking steps to facilitate Islamic investment. China, with 80m Muslims, recently awarded its first licence for Islamic banking to Bank of Ningxia, a move that could pave the way for sharia-compliant financing in the rest of the country.
India is keen to attract a greater share of Gulf investment. The United Arab Emirates is already one of India's largest trading partners, while about 4.5m Indians work in the Gulf. political and business leaders in the region have expressed their enthusiasm for larger investments in the Indian economy.
Sheikh Nahyan bin Mubarak Al Nahyan, the UAE's minister of education and a leading Arab investor, said: "While countries around the world continue to feel the pinch of the economic downturn, India's economy is buoyant and in relatively good condition. Investment opportunities abound in this vast, innovation-driven country."
By James Fontanella-Khan in Mumbai and James Lamont in New Delhi&
© Financial Times 2010
Source: Zawya
K Rahman Khan, deputy chairman of India's upper house of parliament, told the Financial Times that the ruling Congress party is proposing reforms to the finance ministry, the Reserve Bank of India and Securities and Exchange Board of India to allow for the introduction of Islamic financial services.
"Islamic finance has been growing at a steady pace and it is the most attractive form of alternative [banking] system in the financial sector, it makes no sense for India to exclude itself from this success story," said Mr Khan.
try{document.write(_banner_zone('zone9339')); }catch(e){} India, with more than 150m Muslims, has the world's largest Muslim minority. Many Muslims are discouraged from banking with commercial banks by religious proscriptions against interest. Some are wary of investing to avoid financial involvement with gambling or alcohol companies, according to the Institute of Objective Studies, a research group focusing on the Muslim community.
The southern state of Kerala, which has a large Muslim population and many workers overseas in the Gulf, is backing the launch of a company that would offer Islamic banking services, but its opening has been held up by a legal challenge from a former government official who argues the venture would violate constitutional provisions on religious neutrality.
The Congress party's report, which Mr Khan said had been endorsed by Manmohan Singh, the prime minister, falls short of supporting the creation of a full-fledged Islamic banking sector at a time when regulators are shy of liberalisation.
Mr Khan said that the "main goal at the moment is to help set up non-banking institutions that will allow Indian citizens to save and invest in a sharia-compliant manner and to attract foreign direct investment from the Gulf...At a later stage we will be looking into setting up Islamic banking."
Some western and emerging economies are taking steps to facilitate Islamic investment. China, with 80m Muslims, recently awarded its first licence for Islamic banking to Bank of Ningxia, a move that could pave the way for sharia-compliant financing in the rest of the country.
India is keen to attract a greater share of Gulf investment. The United Arab Emirates is already one of India's largest trading partners, while about 4.5m Indians work in the Gulf. political and business leaders in the region have expressed their enthusiasm for larger investments in the Indian economy.
Sheikh Nahyan bin Mubarak Al Nahyan, the UAE's minister of education and a leading Arab investor, said: "While countries around the world continue to feel the pinch of the economic downturn, India's economy is buoyant and in relatively good condition. Investment opportunities abound in this vast, innovation-driven country."
By James Fontanella-Khan in Mumbai and James Lamont in New Delhi&
© Financial Times 2010
Source: Zawya
