India should open interest free banking windows in conventional banks as a pilot project, Muddassir Siddqui, a leading authority on interest-free banking, today said.
Making a strong plea for launching Islamic banking in India, Siddqui, Partner and Head of Islamic Finance, Middle East, SNR Denton and Company, told reporters here that there was lot of ‘misunderstandings’ regarding Islamic Banking in India. ‘We are just asking for level playing field. We want it in conventional system. We do not want any favours’, he said.
On issues relating to recovery in cases of loan defaults, he said it is done the same way as convetnional banking.
When pointed that the Union government had in a counter affidavit filed in the kerala high court on Sept 9 stated that ‘it was not legally feasible for banks in India or its branches abroad to undertake Islamic banking activities’, he said discussions had been held with Union Finance ministry officials and RBI regarding Islamic banking. Recently, some documents were submitted to RBI. Several round of discussions have also been held with RBI officials, he said.
‘We held close interactions with finance ministry and RBI officials. We hope the ice is breaking’, he said.
There was no time frame for setting up Islamic banking. ‘We are hopeful permission would be granted very soon’
Currently, close to $1 trillion is being managed by about 400-500 Islamic banks worldwide and by 2020, it is expected to touch $4 million.
The adoption of interest free banking system in the country offers a great opportunity to attract substantial investments from countries in the West Asian region to India, he said adding institutions and high net worth individuals from these countries are looking forward to investment opportunties in India.
According to projections by global consultant McKenzie, investment surplus in the west asian region is expected to be around 9 trillion dollars by 2020. Currently the investment surplus is around 1.5 trillion dollars. India can attract a good portion of this huge investment potential by developing the appropriate regulatory framework, Abdur Raqeeb, ICIF said. Regulatory framework suitable for intress free banking will not have any impact on the exisiting financial system in the country, he said.
A two day conference on Islamic Finance in India is being held from tomorrow to create awareness about the banking system.
The Kerala High court had in April this year directed the state government and its institutions not to participate financially or otherwise in the financial company modelled on the lines of Islamic bank.