The response given by the Finance Ministry on a RBI report about the introduction of Sharia banking in India cannot be disclosed, the central bank has...
The response given by the Finance Ministry on a RBI report about the introduction of Sharia banking in India cannot be disclosed, the central bank has said. "In this regard, we have been advised by the DFS (Department of Financial Services), Government of India that the letter is exempt under Section 8 (1) (c) of the RTI Act," the RBI said in response to an RTI application filed by PTI.
The Section bars disclosure of information "which would cause a breach of privilege of Parliament or the state legislature." In November 2016, the RBI proposed opening of “Islamic window” in conventional banks for “gradual” introduction of Sharia-compliant or interest-free banking in the country. Both the Centre and RBI wanted to explore the possibility of introduction of Islamic banking for long to ensure financial inclusion of those sections of the society that remain excluded due to religious reasons.
Islamic or Sharia banking is a finance system based on the principles of not charging interest, which is prohibited under Islam. Sharia prohibits acceptance of specific interest or fees for loans of money (known as riba, or usury), whether the payment is fixed or floating. Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam ("sinful and prohibited").
Interest-free banking for financial inclusion will require a proper process of the product being certified as Sharia compliant will be required both on the asset and liability side and the funds received under the interest-free banking could not be mingled with other funds and therefore, this banking will have to be conducted under a separate window.
Islamic law allows reasonable profit and return on investment as opposed to an interest rate which is undue profit. Under the Islamic system, banks may accept money from investors and put them in Shariat-compliant businesses and share profit or loss with the investors.
The stipulations of Islamic banking are Amongst the governing principles of an Islamic bank are: ban on interest-based (riba) transactions; no economic activities involving oppression (zulm); avoidance of economic activities involving speculation (gharar); 4. Introduction of an Islamic tax, zakat; and 5. Discouragement of production of goods and services which contradict the Islamic value (haram)