Central government considering Islamic banking

By TwoCircles.net Staff Correspondent,

Malappuram: The central government is reportedly considering the scopes of Islamic banking in the country in order to invite big investments in the time of economic crisis. Investments including those from Arab countries could be used for infrastructural development and other purposes if the central government begins Islamic banking.

The Intelligence Bureau is reportedly studying the working methods of several private Islamic finance institutions in different states. The IB is reportedly directed to submit a detailed report on the matter.

Investments from the Arab countries have been flowing to countries like the USA due to the power of the dollar. Several American banks had reportedly even started ‘interest-free Islamic windows’ aiming Arab investments. Islamic banks began operation in the UK and other countries too. Islamic banks have been established in countries like Singapore, Thailand, Germany and Japan. But, Arab investors are now hesitant to invest in western countries due to the economic crisis in the US and inconsistency in the value of the dollar. Full-fledged Islamic bank could not be opened in India due to the rules and directives of the Reserve Bank.

It is analysed that India could draw investments from NRIs who don’t expect interest as well Arab investments now in the western countries. Presently, several NRIs have invested in banks on condition that they would not receive any interest. Detailed study on the matter has come in such a circumstance. It is expected that common people too could borrow interest-free loans for education, agriculture, etc if full-fledged Islamic banking comes into effect. However, amendments would have to be made in the rules of the reserve Bank for the purpose.

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