Monday March 25, 2019
Home India RBI Proposes ...

RBI Proposes Islamic Window in Banks for Gradual Introduction of Sharia Banking

The Reserve Bank of India (RBI) has proposed the introduction of "Islamic window" in the conventional banks for "gradual" start of Sharia-compliant or interest-free banking in the country

0
//
Reserve Bank of India. VOA

New Delhi, November 20, 2016: The Reserve Bank of India (RBI) has proposed the introduction of “Islamic window” in the conventional banks for “gradual” start of Sharia-compliant or interest-free banking in the country.

NewsGram brings to you latest new stories in India

Both the RBI and Centre are looking for the possibility of the introduction of Islamic banking so as to ensure the financial inclusion of those sections of the society that remain not a part due to mere religious reasons.

Islamic or Sharia banking is a finance system based on the principles of not charging interest, which is prohibited under Islam.

[bctt tweet=”RBI proposes to introduce Sharia Banking” username=””]

“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.”

“Introduction of full-fledged Islamic banking with profit-loss sharing complex products may be considered at a later stage on the basis of experience gained in course of time,” the RBI has told Finance Ministry in a letter, according to PTI report.

Go to NewsGram and check out news related to political current issues

“It is also our understanding that interest-free banking for financial inclusion will require a proper process of the product being certified as Sharia compliant will be required both on the asset and liability side and the funds received under the interest-free banking could not be mingled with other funds and therefore, this banking will have to be conducted under a separate window,” it said.

Representational image. Pixabay
Representational image. Pixabay

The central bank’s proposal is based on the examination of legal, regulatory and technical issues regarding the feasibility of introducing the Islamic banking in India on the recommendation of the Inter Departmental Group (IDG).
RBI has also assembled a technical analysis report which has been sent to the Finance Ministry.

Look for latest news from India in NewsGram

“In case it is decided to introduce Islamic banking product in India as suggested, RBI would require to undertake further work to put in place the operational and regulatory framework to facilitate introduction of such products by banks in India,” the letter said.

by NewsGram team with PTI inputs

Next Story

RBI May Recoup Reserves, Strong Inflow of Foreign Funds And Benign Oil Prices Strengthening Indian Currency

A major factor supporting the rupee is the strong prospect of better fund flows from abroad.

0
RBI
Experts now see a chance for the RBI to recoup the reserves it spent in 2018 defending the rupee. Pixabay

A strong inflow of foreign funds and benign oil prices have strengthened the Indian currency but what has worked best for the rupee is the fading impact of war hysteria. Experts now see a chance for the RBI to recoup the reserves it spent in 2018 defending the rupee.

Putting a number to this, Gurang Somaiya, currency analyst at Motilal Oswal, said: “It is possible that RBI may limit some of the appreciation and recoup some of its lost reserves… but it may only come if the rupee strengthens to around Rs 68.20 a dollar.”

Explaining the factors at play, Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, said: “Post-Abhinandan (shooting down of the IAF pilot), geopolitical risk has subsided which has boosted investor sentiments.”

oil prices
The decline in crude oil, which accounts for a large import bill for India, directly affects the exchange rates.
Pixabay

Banerjee added that the gains of the rupee will help the Reserve Bank of India recoup reserves which it lost last year in a bid to arrest its fall.

“The rupee appreciated and closed at 70.14 for the last week on the back of strong flows and fading impact of war hysteria,” said Sajal Gupta, Head Forex and Rates, Edelweiss Securities.

In addition, Gupta said that some “big flows are lined up next week. Maybe Arcelor Mittal money can hit the Indian markets which can lead to some more appreciation towards 69.50 unless the RBI intervenes”.

However, the rising dollar index is causing nervousness and any breakout may lead to a reversal in the rupee’s trend, said Gupta. Somaiya said that RBI may choose not to intervene as the central bank’s prime aim was to arrest volatility.

“Yes the rupee is inching below the 70-a-dollar mark but then the (general) election can cause massive volatility. Also, it is seen that a lot of central banks are getting into a dovish stance owing to the fears of global slowdown.”

The RBI had to stop the slump in the rupee late last year after it touched an all-time high of 74.47 on October 11 following the rising crude oil prices.

dollar
However, the rising dollar index is causing nervousness and any breakout may lead to a reversal in the rupee’s trend, said Gupta. Somaiya said that RBI may choose not to intervene as the central bank’s prime aim was to arrest volatility. Pixabay

The Brent Crude touched $86-a-barrel mark in early October but started to ease following the US decision to exempt 8 countries, including India and China, to continue buying oil for six months from Iran despite sanctions.

The decline in crude oil, which accounts for a large import bill for India, directly affects the exchange rates.

A major factor supporting the rupee is the strong prospect of better fund flows from abroad.

Also Read: The Dining Table Starts Turning To The DIEning Table, Is Eating Alone Healthy?

“Inflows into India have clearly turned positive since the end of January. The flows in February at Rs 17,720 crore is the highest since November 2017. The trigger for this inflows is the dovish statement that came from the Fed at the end of January,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

India’s foreign exchange reserves stood at $401.78 billion as against $393.13 billion in November last year. As the data suggests, with improving macros, the forex is already on the recovery path. (IANS)