The Narendra Modi government has opened the door for the controversial and much talked about Islamic Bank in India. According to a Delhi-based Urdu newspaper Sahafat (May 25), Islamic Development Bank of Saudi Arabia is opening Islamic Bank in India which will start from Gujarat. Islamic Development Bank (IDB) works under the Sharia Laws and its purpose is to uplift Muslim community. This bank has 56 members. Islamic Bank signed a pact with Indian banks during Modi's visit to Saudi Arabia in April. Islamic Bank will make $550 lakh available for the medical facilities in rural India. Islamic Bank plans to run 350 medical vans under this programme which would work as mobile clinic in the rural area. Besides that it had shown interest in small and medium industries. Chancellor of Maulana Azad National Urdu University Zafar Sareshwala said that India would be benefited after Islamic Banks forays into India. Sareshwala had gone to Saudi Arabia along with Modi. This news report was published by another Urdu newspqper Roznama Rashtriya Sahara on May 25.
According to Kapil Dave of the English newspaper The Times of India in its Ahmedabad edition (May 24), when PM Narendra Modi visited Saudi Arabia Islamic Development Bank entered into a deal with an Indian Bank called EXIM Bank and as per the deal it would invest $10 billion. Besides that another deal worth $5.5 crore was signed with Islamic Development Bank under which 350 automatic medical van will be made available in the rural areas. For the time being 30 vans will be made available in the tribal areas of Gujarat like Chhota Udepur, Narmada and Bharuch districts. According to the newspaper, Islamic Development Bank and its affiliate organization Islamic Corporation discussed the matter with the officials of Reserve Bank of India. Zafar Sareshwala, a close associate of PM Modi, said that the first branch of Islamic Bank would be opened in Ahmedabad. The bank will help small and medium entrepreneurs. He said that with the Islamic Bank coming to India there was the possibility of private investment pouring in India from the friendly countries. Islamic Development Bank will also hugely invest in the development of Waqf Properties. According to Zafar Sareshwala, there are a huge number of waqf properties in Gujarat but since waqf board does not have enough money to develop them, they are neglected. Islamic Development Bank will hugely invest into waqf properties to develop them.
Comment: Islamic countries had been trying to set up Islamic Bank in India for several decades. The Kerala government had set up a joint venture of Private Financial Corporation with the aim of setting up branches of Islamic Bank with their help that included huge investment from the private sector. But the RBI did not allow Islamic Bank to work in Kerala because Islamic Bank was not fit in its benchmark so they could be allowed to work in India. The biggest hurdle was that Islamic Bank did not give any interest on any deposit in the bank account as giving and taking interest are sin as per Islam. However, banks set up as per Indian Banking System give interest on any deposit in the bank. Muslim members have taken up the matter of setting up Islamic Bank in Parliament on several occasions but the ruling Congress did not allow setting up Islamic Bank. Muslim MPs argued that if Islamic Bank started functioning in India, new opportunities of investment will come up. Indian infrastructure could be developed with the help of Islamic nations. Muslims had set up a private firm in Hyderabad which trained Muslim youths to run Islamic banks. Muslim organizations in the country have been lobbying for conducive environment in the country for over two decades but they had failed. The Important question is that if RBI would allow functioning of Islamic Bank in India? Will there be amendment in the previous norms laid downs for banks? Will there be any interference of the government or the RBI in the functioning of this bank? Experts are of the view that if Islamic Bank is started in the country, it must take the benefit of Article 25 to 31 in wh,ich minorities are guaranteed that the government would not interfere into the institutions set up by the community. If this happens, Islamic Banks might become ... a big headache for the country. Rajya Sabha member Subramanian Swamy took the matter to the Supreme Court and he said that setting up Islamic Bank would encourage Islamisation of the country.
India Policy Foundation, June 1-15, 2016 - June 16-30, 2016