New Delhi, Jan 5: In a major move, the government on Friday rejected a proposal for introduction of Islamic banking in the country, Shiv Pratap Shukla, Minister of State (MoS) for Finance, said in a written reply to a question in Lok Sabha.
The MoS said the government cannot pursue a proposal for introduction of Islamic banking due to legal hurdles. Islamic or Sharia banking is a financial system based on the principles of not charging interest, which is prohibited in Islam.
In 2016, the Reserve Bank of India (RBI) has proposed the opening of “Islamic window” in conventional banks for “gradual” introduction of Sharia-compliant or interest-free banking in the country. However, the central bank decided not to pursue the proposal a year later.
Ahead of the start of Winter Session, Union minister Mukhtar Abbas Naqvi also said India has a wide network of different banks to meet the financial needs of people and hence the government has no intention to consider introducing Islamic banking.
In 2008, a committee, 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.