RBI proposes ‘Islamic Window’ in Banks
The Reserve Bank of India (RBI) has come up with a proposal for opening of ‘Islamic window’ in conventional banks for a gradual introduction of Sharia-compliant (interest-free) banking in the country. The move is aimed to ensure financial inclusion of some sections of society that remains excluded due to religious concerns.
Islamic banking is banking or banking activity that is consistent with the principles of sharia and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest of fee for loan of money. It is different from regular banking in that it prohibits earning of interest (or riba) through the business of lending.
RBI has prepared and submitted a technical analysis report to the Finance Ministry regarding the proposal. RBI in its annual report for 2015-16 has stated that some sections of the society have remained financially excluded due to religious reasons. RBI’s proposal is based on the basis of the recommendation of the Inter Departmental Group (IDG) and examination of various issues regarding the feasibility of Islamic Banking.
Since Indian banks have no experience in this field, Islamic Banking is proposed to be introduced very gradually. Moreover, as funds received under the interest-free banking could not be mingled with other funds, Islamic banking has to be conducted under a separate window.