Deccan Chronicle: New Delhi: Tuesday,
February 28, 2017.
The response
given by the Finance Ministry on an RBI report about the introduction of Sharia
banking in India cannot be disclosed, the central bank has said.
The Reserve
Bank of India (RBI) was asked to give the copy of the letter sent to it by the
ministry on the recommendation of its Inter Departmental Group (IDG) regarding
Islamic banking
The central
bank had sought response from the Department of Financial Services (DFS) under
the finance minister whether their letter can be disclosed under the Right to
Information (RTI) Act.
"In this
regard we have been advised by the DFS, Government of India that the letter is
exempt under Section 8 (1) (c)," 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". Islamic or Sharia banking is a
finance system based on the principles of not charging interest, which is
prohibited under Islam.
The RBI had
earlier proposed opening of "Islamic window" in conventional banks
for gradual introduction of Sharia- compliant or interest-free banking in the
country. "In our considered opinion, given the complexities of Islamic
finance and various regulatory and supervisory challenges involved in the
matter and also due to the fact that Indian banks have no experience in this
field, Islamic banking may be introduced in India in a gradual manner.
"Initially,
a few simple products which are similar to conventional banking products may be
considered for introduction through Islamic window of the conventional banks
after necessary notification by the government," the RBI had told the
Finance Ministry in a letter, copy of which was received in response to the RTI
query.
The central
bank's proposal is based on examination of legal, technical and regulatory
issues regarding feasibility of introducing Islamic banking in India on the
basis of recommendation of the IDG.
The RBI had
in February last year sent a copy of the IDG to the Finance Ministry. In late
2008, a committee on Financial Sector Reforms, headed by former RBI Governor Raghuram
Rajan, had opined the need for a closer look at the issue 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.
"This
non-availability also denies the country access to substantial sources of
savings from other countries in the region," it added.