RBI proposes gradual opening of Sharia-compliant banking finds out an RTI query

The letter was obtained by PTI in response to an RTI query filed by the news agency.

Sharia is a form of Islamic banking system that runs of the principle of not charging interest as it is prohibited by the religion.

Realising that a section of the society is outside the banking domain owing to religions sentiments, the Centre and the RBI are mulling the option of introducing Islamic banking to ease the process for this section of people.

The letter obtained by PTI says, "In our considered opinion, given the complexities of Islamic finance and various regulatory and supervisory challenges involved in the matter and also due to the fact that Indian banks have no experience in this field, Islamic banking may be introduced in India in a gradual manner."

It also mentioned that initially, a few simple products, which are similar to conventional banking products may be considered for introduction through Islamic window of the conventional banks after necessary notification by the government.

"Introduction of full-fledged Islamic banking with profit-loss sharing complex products may be considered at a later stage on the basis of experience gained in course of time," it was mentioned in the letter.

The central bank's proposal is based on examination of legal, technical and regulatory issues regarding feasibility of introducing Islamic banking in India on the basis of recommendation of the Inter Departmental Group (IDG). RBI has also prepared a technical analysis report which has been sent to the Finance Ministry, according to media reports.

Image: Wikimedia Commons