Delhi: In a major move, the Reserve Bank of India (RBI) has decided not to pursue a proposal for introduction of Islamic banking in the country.
Replying to an RTI query, the central bank said the decision was taken after considering “the wider and equal opportunities” available to all citizens to access banking and financial services.
Islamic or Sharia banking is a finance system based on the principles of not charging interest, which is prohibited under Islam.
The issue of introduction of Islamic banking in India was examined by the RBI and the government of India, it said.
“Taking into account, the wider and equal opportunities available to all citizens to access banking and financial services, it has been decided not to pursue the proposal further,” the central bank said in its reply to the RTI application.
The RBI was asked to provide details of steps being taken for the introduction of Islamic or ‘interest-free’ banking in India.
In late 2008, a committee on Financial Sector Reforms, headed by former RBI governor Raghuram Rajan, had stressed on the need for a closer look at the issue of interest-free banking in the country.
Later, on the instruction of the central government, an inter-departmental group (IDG) set up in the RBI examined the legal, technical and regulatory issues for introducing interest free banking in India and has submitted its report to the government.
The RBI had in February last year sent a copy of the IDG report to the finance ministry and recommended an “Islamic window” in conventional banks for gradual introduction of Sharia-compliant banking.