Kerala to have Islamic Banking Institutions
Kerla High Court on Feb 3rd gave its assent to setting up Islamic Sharia-based banking institutions in Kerala with the participation of Kerala State Industrial Development Corporation (KSIDC). Such institutions work free of interest.
Chief Justice Chalameshwar gave green signal to Al Baraka Company, dismissing petitions filed by politician Subramania Swamy and others. Swamy's argument was that public money can't be used for promoting an institution based on Sharia principle in a secular country.
Al Baraka has 14 promotors, and a 17-member Board. Prominent gulf-based business man P. Mohammad Ali is the Chairman and C.K. Menon is the vice chairman. KSIDC will have 11% equity in the institution. The firm will work on the lines of Islamic banking principles, and won't charge or pay interest. Funds will be invested in infrastructure projects, and investors will be paid returns in the form of dividends, sharing the profits generated.
As per current laws in the Indian banking industry, Islamic banking is not permitted, as banking principles are based on interest payment. Last year, Prime Minister Manmohan Singh had asked the RBI to look into the matter. A separate legislation might be required to allow Islamic banking in India.
Muslim community, which comes about 15% of India's population, has been demanding Islamic banking in the country for a long time.
More articles: Islamic Banking in Kerala