- The Reserve Bank of India has proposed opening “Islamic window” in conventional banks for “gradual” introduction of Sharia-compliant banking in India.
- “Initially, a few simple products similar to conventional banking products may be considered for introduction through Islamic window,” RBI said. Islamic banking is based on principles of not charging interest, which is prohibited under Islam.
- The Sharia concept is primarily aimed to enable banking services to devout Muslims who do not prefer conventional banking options due to religious restrictions which include not taking credit cards from banks.
- According to a report released by Sachar Committee back in 2006, Muslim holds 12 per cent of accounts in public sector banks and 11.3 per cent in private sector banks which is less than their share of 13.4 per cent of the overall population.
- In the wake of the above-mentioned facts, the introduction of Sharia or Islamic banking could onboard more Muslims into the banking ecosystem to further boost the inflow of institutional wealth from people/ entities operating in the Islamic world to the Indian economy.
- This banking model is not just limited to the Muslims, but other communities who are drifted towards ethical banking could be allowed to enrol.
What is Islamic Banking?
- The Organization of Islamic Conference (OIC) defined Islamic banking as “a financial institution whose statutes, rules and procedures expressly state its commitment to the Principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations “