Govt may allow Islamic banking, eyes $1 tn funds

NEW DELHI: Aggressively pitching for $1 trillion worth of Sharia-compliant funds from the Gulf countries for investments in its infrastructure development, the UPA government has drafted a report on Islamic banking even as RBI and the finance ministry are jointly working on necessary legislative changes to implement the same.

A committee headed by the Cabinet Secretary and comprising secretaries from other ministries, including finance, submitted a report to the government recently on the prospects of Islamic banking in the country and on drawing investments from abroad, Rajya Sabha deputy chairperson K Rahman Khan said on Wednesday.

Khan is behind an Indo-Arab Economic Summit to be organised in the Capital from February 3-4 where authorities from the Arab world will be present.

The summit will be presided over by foreign minister S M Krishna. “The emphasis will be to attract investments from these countries through opening up channels like venture capital and mutual fund options which are largely Sharia-compliant ," Khan added.
The government has already started similar initiatives with UTI and SBI where certain mutual fund alternatives are available for people to invest in such funds, he added.

To project it as a more secular initiative, the government may term it as ‘participative banking' rather than Islamic banking. "It is an alternative system of banking where people belonging to certain faith and belief can save their money and earn from it too," said Khan, who is also the patron of Indo-Arab Economic Co-operation Forum which is organizing the summit.

According to Khan, the motive behind the summit is to bring the Arabian countries closer to India which has an advantage vis-a-vis China and western countries mainly due to its democratic and liberal credentials and because it is an attractive investment destination.