New Delhi: The Reserve Bank of India (RBI) has decided not to pursue a proposal to introduce Islamic banking in India.
In response to an RTI query, the central bank said, “Taking into account the wider and equal opportunities available to all citizens to access banking and financial services, it has been decided not to pursue the proposal [to introduce Islamic banking] further”.
Islamic or Sharia banking is a finance system based on the principles of not charging interest, which is prohibited under Islam.
In late 2008, a committee headed by former RBI governor Raghuram Rajan had proposed the need of interest-free banking in the country.
“Certain faiths prohibit the use of financial instruments that pay interest. The non-availability of interest-free banking products results in some Indians, including those in the economically disadvantaged strata of society, not being able to access banking products and services due to reasons of faith,” the committee had said.
Later, an inter-departmental group (IDG) was set up in the RBI on the instruction of the central government to examine the legal, technical and regulatory issues for introducing interest free banking in India.
The RBI had in February last year sent a copy of the IDG report to the finance ministry and recommended an “Islamic window” in conventional banks for gradual introduction of Sharia-compliant banking.