Thousands of crores lying unaccounted in banks across the country and belonging to Muslims could be used for the uplift of the poor section of the community, provided the Reserve Bank of India (RBI) gives the go-ahead. A move to such an effect has been put forward to the Union Finance Ministry by the National Commission for Minorities (NCM) chairman Wajahat Habibullah.
Habibullah's idea is based on the Islamic tenet which considers giving and receiving interest against the cause of the religion. This has resulted in a huge amount of money lying unaccounted in banks, which the NCM hopes could be somehow made use of for the benefit of Muslims in India. And one of them is opening the doors to 'interest-free' banking in India for the community.
Talking to Mail Today, Habibullah said: "We're just exploring if the interest-free banking option could be included in the country's financial system… In case interest- free banking cannot be introduced, can the ministry determine the quantum of money lying idle in banks so that concurrence could be sought from depositors for utilizing such amount for the benefit of economically disadvantaged Muslims?"
The NCM chief clarified that the proposal also includes the option of granting interest-free loans to the Muslim community under the Islamic banking system. But if that is not possible due to the existing banking regulations, the NCM intends to ask the ministry for a way out to utilize the unaccounted money lying in the banks and on which the interest is piling up.
So far, the RBI has been wary of the consequences of Islamic banking and had kept the issue under wraps. Senior banking officials had maintained that it is not feasible in India as existing regulations do not permit interest-free transactions. Moreover, the RBI's principal concern is how to protect the interest of the depositor in case the bank folds up.
The concept of Islamic banking is not alien to Indian financial institutions as the proposal to introduce it has been on the discussion table for over a decade. It was only after fresh recommendations were given by the Anand Sinha committee, constituted by the RBI, and one by the Raghuram Rajan committee, set up by the finance ministry, that the issue has once again been brought into the limelight.
The NCM members recently met over the issue but were cautious against getting labelled as an 'alienated group'. Thousands of crores earned in interest is kept in suspended accounts as believers of Islam do not claim it. The assets controlled by Muslims are estimated to be $1.5 trillion and is growing at 15-20 per cent. In Kerala alone, it is pegged at above `40,000 crore (according to a 2005 estimate). The money is lying idle, which if utilized judiciously, could have a major impact on the economy.
Keeping this in mind, the NCM has requested the RBI to find a possibility to bring in interest-free banking for the use of the community. Habibullah raised the issue at a recent meeting with top finance ministry officials including Sunil Soni, additional secretary, financial services, and Alok Nigam, joint secretary. On the ministry's response, the NCM chief said: "The finance ministry is open to the possibility of allowing some nationalized banks and non-banking financial companies (NBFCs) to open accounts that will offer interestfree products."
The finance ministry has now referred the NCM proposal to Sinha, currently a deputy governor of the RBI. "The ball is in the RBI's court... we do not intend to impose on it to introduce the system, but only explore the possibility of utilising the idle accounts for the benefit of needy Muslims," Habibullah said.
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