Given the current banking sector regulations in the country, Islamic banking is not practicable in India, said Mufti Abdul Kadir Barkatullah, a British expert on Islamic banking and finance.
Since giving or taking interest is against the Sharia laws, Islamic banks need to look to other areas, such as trading, to generate profits to meet their costs. In India, banks are not allowed to get involved in trading and hence Islamic banks cannot survive, the India-born Mr. Barkatullah pointed out. The Raghuram Rajan recommendations on banking reforms, if implemented, would accommodate Islamic banking institutions.
However, several other areas of finance, such as real estate funding and venture capital, were Sharia-compliant and hence Islamic finance had a lot of growth potential in India. (Islamic banking, according to Wikipedia, `refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics.’) Mr. Barkatullah, who is a senior Imam of Finchley Mosque in London and prominent Sharia scholar with an educational background in Economics and Finance, pointed out that profit was not anathema to Islamic finance, only, but it should be principle-guided. It was driven by two major principles: the economic activity should not cause harm to society as well as to individuals; and, that risks and rewards should be shared — not rewards alone. The economic activity should be fair, equitable, transparent and based on clearly laid down terms.
Mr. Barkatullah, who is also adviser to several banks, pointed out that Islamic banking, which was just three decades old, was still a developing concept and would take time to stand on its own. It thrived in several Western countries, especially Britain, though at a micro level. Nearly one-fifth of the Islamic bank customers in Britain were non-Muslim.
source : thehindu