The introduction of Islamic banking was recommended by a committee on financial sector reforms, set up by the Planning Commission, for delivery of interest-free finance on a larger scale, even through the banking system.
However, the government decided not to go ahead with the recommendations, and said it was not feasible to introduce the new system in the current scheme of things.
‘In the current statutory and regulatory framework, it is not feasible for banks in India to undertake Islamic banking activities,’ Minister of State for Finance Namo Narain Meena told the Lok Sabha Friday.
He said the rules will apply to domestic banks and their international operations and any foreign bank operating in India.
A large number of around 150 million Muslims in India – the third largest Muslim population in the world after Indonesia and Pakistan – prefer to stay away from commercial banks due to religious proscriptions against interest-driven banking.
The values of interest-free Islamic banking are finding greater recognition. China, which has around 80 million Muslims, recently gave its first licence for Islamic banking to the Bank of Ningxia.
source : newdelhinews