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Early introduction of Islamic banking sought

Special Correspondent

Muslim Forum meets Minister Meena

JAIPUR: The Rajasthan Muslim Forum has called upon Union Minister of State for Finance Namonarain Meena to facilitate introduction of “interest-free Islamic banking windows” within the existing regulations in the conventional banks through a proposal in the 2011-12 Union Budget to be presented in the Parliament's session beginning on Monday.

In a letter addressed to Mr. Meena – who represents the Tonk-Sawai Madhopur Lok Sabha constituency in Rajasthan – the Muslim Forum said here on Sunday that the interest-free banking, the demand for which was consistency being made for quite some time, would enable the economically disadvantaged sections of society to access banking products effectively.

A delegation of the Muslim Forum, an apex body of Muslim groups in the State, had met Mr. Meena in New Delhi a few months ago to raise the issue and handed over to him some reports and documents for action in the matter. Mr. Meena had reportedly assured the delegation that the Finance Ministry would consider the request sympathetically.

Muslim Forum convenor Qari Moinuddin said since the full-fledged implementation of interest-free banking might still take some time, the Union Finance Ministry should give a green signal in the Budget for opening Islamic banking windows in banks, for which no amendment in the Banking Regulation Act, 1949, was required.

The advocates of Islamic economy and banking have been requesting the Union Government to introduce the system on an experimental basis for those unwilling to subscribe to the interest-based economy which is perceived as promoting usury and exploitation.

In the absence of a suitable arrangement, a large number of poor members of the society are left out of the banking system.

A high-level committee on financial sector reforms under Pof. Raghuram Rajan of University of Chicago appointed by the Planning Commission had stated in its report submitted in 2008 that the delivery of interest-free finance on a larger scale, including through banking system, would be “in consonance with the objectives of inclusion and growth through innovation”.

Prior to this, the Reserve Bank of India constituted a working group in 2006 to examine the instruments used in Islamic banking. The letter pointed out that Union Finance Minister Pranab Mukherjee had observed at a recent discussion with bankers and financial providers as part of pre-Budget consultations that banks' penetration was “limited to only a few customer segments and geographies”.

The background was the reported failure of micro-finance institutions in some parts of the country.

The Muslim Forum pointed out that the Justice Rajinder Sachar Committee's report, under the chapter titled “Access to bank credit”, had clearly shown that access of Muslims to formal banking facilities was much lower than that of other minorities. Muslims staying away from interest-based financial instruments are unable to benefit from the country's economic growth,” said the letter.

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