It is mind-boggling and bizarre that a nationalist Government, led by a party which claims to abhor minority appeasement, should allow Islamic banking in a secular nation. let it be said in no uncertain terms that neither is there any pIace for Islamic banking in India nor is there any reason to create a sharia’h-compliant space in the country’s financial sector.
Earlier this week, Saudi Arabia’s Islamic Development Bank announced that it will be opening its first branch in Ahmedabad, Gujarat. Officially, the new venture will accelerate Indian exports to IDB’s 56 Islamic member countries, through a $100 million line of credit that was signed during Prime Minister Narendra Modi’s recent trip to Saudi Arabia. But look at some of the other goodies that the Jeddah-based institution has to offer – a $55 million pact with the Rashtriya Institute of Skill and Education to provide medical care to the rural poor specifically in tribal areas, and a focus on developing supposedly neglected Wakf properties.
Now take into account the stated aim of the IDB to support economic and social development on Islamic principles, not to mention Saudi Arabia’s record of using its petrodollars to incubate Wahhabi Islam around the world, and a fuller, more worrisome picture emerges. India has long resisted Islamic banking -- except in 2013, when one non-banking financial institution was allowed in Kerala -- because the Reserve Bank of India does not permit interest-free banking which is the core principle of Islamic banking.
Moreover, interest-free banking as practiced by Islamic banks is widely considered to be just regular banking with religious names, wherein interests, for example, are masked as profit-sharing tools. Some Muslim nations have their own geo-political compulsions to keep up the façade of Islamic banking but there is no reason why the Government of India should join them. Nip this in the bud before the mullahs jump in and it becomes a political hot potato.