When London, Tokyo, Hong Kong, Singapore and Paris can become hub and house of Islamic finance

Why not Mumbai and Cochin

Presented by:

H ABDUR RAQEEBConvener, National committee on Islamic Banking

GS, Indian Centre for Islamic Finance (ICIF)

New Delhi

Mail: abdraqeeb@gmail.com

Mob:09444075501

INTEREST FREE - ISLAMIC BANKING IN 21ST CENTURY

NOVELTY TO NORMAL BANKING BUSINESS

IN

MODERN INDUSTRIALISED COUNTRIES

BritainSingaporeHong KongUSAFranceThailand

Japan

AustraliaChinaSri LankaKoreaBelgium

PROCEDURES & PROGRESS

• Some of the most important developments in Islamic finance are taking place in the United Kingdom which has overtaken all other G8 countries in placing itself as a leader in Islamic finance.

• Lord Edward George, Governor of Bank of England formed a group with representatives from city, Govt., the Muslim community and Financial Services Authority (FSA) to examine the barriers to Islamic finance in U.K in 2001.

• Sir Gordon Brown, PM : “Foundation for making Britain the Gateway to Islamic Trade is to make Britain, The Global Centre for Islamic Finance” (speech at Islamic Finance & Trade Conference, London, 13 June 2006).

• Under the Finance Act 2003, the UK government introduced relief to prevent double payment of Stamp Duty Land Tax on Islamic mortgages, both on the purchase of the property by the bank and on the transfer of the property by the bank to the customer at the end of the mortgage.

3

Islamic Banking In Britain

Continued……

• In 2004 first Islamic Bank - Islamic Bank of Britain was formed.

• Through the Finance Acts 2005 and 2006, the UK government implemented further measures aimed at putting other Islamic products on the same tax footing as their conventional counterparts.

• In April 2007, the treasury established an Islamic Finance Expert Group representing a broad cross section of opinion from the industry, the city, Muslim organizations, and other bodies including FSA. The general objective is to advice the Govt. on the opportunities of Islamic Finance in U.K.

• The UK government has also made significant amendments to regulations with the aim of facilitating sukuk transactions (Shariah-compliant debt instruments).

• The Finance Act 2007 clarified the tax framework in relation to the issuance of sukuk

• In the U.K budget 2008, Chancellor of Exchequer Mr. Alistair announced to examine the feasibility of a sovereign sukuk issue and in Finance Bill 2008, take legal powers by facilitating the issuance of sukuk by classifying sukuk as loan capital for stamp duty purposes. 4

Continued……

5

• Gateway Bank, the fifth Islamic Bank in Britain submitted an application for license in November 2007 and got License approved on April, 22, 2008, in a short span of six months.

• Islamic Bank of Britain wins Global Finance award on 9 June, 2009.

• The 2009 act provides relief from some capital gains tax related to Sharia-compliant offerings and relief from stamp duty land tax where transactions are a part of an “alternative finance investment bond” issue.

• To date, the FSA of the UK has authorised at least five Islamic banks* to operate in the United Kingdom, including the Islamic Bank of Britain and the European Islamic Investment Bank. The FSA has also authorised one Islamic hedge fund manager and is considering an application from the first wholly Islamic Takaful (insurance) provider.

• The above-mentioned developments in the UK are important because of the UK’s status as a G8 industrialized country and because of London’s pre-eminence as a global financial centre.

*Bank of London and the Middle East plc (BLME), European Finance House, European Islamic Investment Bank PLC (EIIB), Gatehouse Bank and Islamic Bank of Britain (IBB)

• “I want to turn Singapore into a center for Islamic financial services” Goh chok Tong, former Singapore Prime Minister and chairman of the Monetary Authority of Singapore (MAS).

• “A presence in Islamic Banking is key to becoming a leader in the Asian Capital Market.”, Jackson Thai, CEO, DBS.

• The Monetary Authority of Singapore (MAS) is to accommodate Islamic finance within the existing conventional regulatory framework and to level the playing field by ensuring the neutrality of regulations where Islamic financing is similar to conventional financing in economic substance and risks.

• Issued the Banking (Amendment) Regulations 2005 to exempt Murabaha financing from the restriction in the Singaporean Banking Act against non-financial activities 6

Islamic Banking in Singapore

Continued……

7

• The first shariah-compliant pan-Asian equity index launched in Feb 2006.

• First Islamic Bank started in Singapore by DBS Bank in May 2007, named as Islamic Bank of Asia (IB Asia).

• In 2007, MAS accorded retail Murabaha investors the same regulatory protection under the Singapore Banking Act as conventional depositors, for example in priority of claims ahead of general unsecured creditors

• Singapore has also removed the imposition of double stamp duties in Islamic transactions involving real estate and accorded the same concessionary tax treatment on income from Islamic bonds.

• In February 2008, the Singaporean Finance Minister announced the introduction of a 5% concessionary tax rate for 5 years for qualifying Shariah-compliant financial activities such as in lending, fund management takaful and retakaful. Continued……

8

• In 2009, Singapore passed legislation allowing Singapore-based banks to enter into diminishing Musharaka financing and spot Murabaha transactions. In addition, MAS has recently published extensive guidelines providing banks with guidance on the regulation of Islamic banking in Singapore. It is expected that these changes will allow banks to conduct a wide range of Islamic financing activities, and to have greater flexibility in structuring instruments to meet their risk management needs.

• MAS is currently part of the IFSB Supervisory Review Process Working Group and the IFSB Islamic Money Market Taskforce.

• On January 19,2009, The Govt. of Singapore launched an $200m (US $134m) shariah-compliant sovereign Sukuk designed specifically to attract foreign direct investment and to establish Singapore as an emerging regional centre for Islamic Finance.

• Sixth annual summit of IFSB – Islamic financial services board- meet at singapore on May 11, 2009

• Hong Kong being third largest International Financial Centre aims to become an Asian Hub for Islamic Finance.

• Hong Kong recognised as gateway to investing in China is attracting Shariah based financing to invest petrodollars through Shariah Compliant investments in China.

• Hang Seng Bank launched Hong Kong’s first Islamic vehicle fund- Hang Seng Islamic China Index Fund.

• The Hong Kong Airport Authority is considering a sukuk issuance for its development.

9

Islamic Banking in Hong Kong

Continued……

10

• The Hong Kong Monetary Authority has formed a working group in coordination with the Dubai International Financial Centre to promote the mutual development of Islamic finance and financial market infrastructure.

• Hong Leong Islamic Bank (HLISB) is a wholly owned subsidiary of Hong Leong Bank (HLB). While it began as the Islamic Banking arm of HLB, it was eventually incorporated as a separate entity on 28 March 2005 and is today a full-fledged Islamic Bank.

• In March 2009, Hong Kong announced its budget, claiming that the Hong Kong special administrative Region government would send a draft law to the Legislative Council later in the year, aimed at creating a level playing field between Islamic financial products and conventional ones.

• In 2009, the Hong Kong Monetary Authority also signed a Memorandum of Understanding with Bank Negara Malaysia on co-operation in the development of the financial services industry, particularly in the area of Islamic finance.

• Hong Kong monetary Authority is also an associate member of International Financial Services Board (IFSB).

• In 2007, the Bank of Japan joined the Islamic Financial Services Board as an Observer Member.

• In December 2008, the Financial Services Agency of Japan amended the banking regulations to allow subsidiaries of Japanese banks to engage in Islamic financial transactions.

• Huge potential for Islamic Finance among Japanese utilities, especially in the power, electricity, oil and natural gas sections. The utilities also have huge potential to issue sukuk and other Shariah-compliant securities.

• State owned Japanese Bank for International Cooperation (JBIC) is in the process of issuing $100 million Islamic bonds.

Islamic Banking in Japan

• Office of the Comptroller of Currency (OCC), Administrator of National Banks approved Shariah compliant banking products of Islamic leasing and Murabaha, to be a part of U.S business of banking practice way back in 1990s.

• Citigroup and HSBC operate Islamic Windows.

• HSBC has Master Money and Debit Master Card for Shariah based customers.

• Texas – based oil firm East Cameron partners, issued the first American sukuk of $ 165.7 Millions in July 2007 (NY Times)

• US treasury Department visited Harvard law school – Islamic legal Division for in depth study of Islamic Banking & Finance after Financial Tsunami of Sept. 2008

Islamic Banking in U.S

12

Islamic Banking in France• France has 5 million Muslims (Western Europe's largest Muslim

community)

• Economy minister Christine Legarde pledged to take steps to make Islamic Banking activities as welcome in Paris as they are in London or elsewhere (Reuters)

• Following a round table discussion with important industry participants in May 2008, the French Ministry of Economy and Industry (the Autorité des Marchés Financiers authority or AMF) announced regulatory and tax changes to facilitate Islamic finance in France, including changes related to sukuk listings in France, the tax treatment of Islamic finance transactions and the introduction of trusts (fiducie) into French law which form the central basis for modern sukuk transactions.

13Continued……

14

• The AMF also published a statement in July 2008 relating to the listing of sukuk on French regulated markets. The AMF stated that sukuk issues may be structured either as asset-based or asset-backed. The AMF also set out the level of disclosure and other requirements in relation to the prospectus for each type of sukuk.

• In 2008, France introduced tax neutrality laws for murabaha and sukuk. The French legislation will ensure that for tax purposes, Islamic transactions would be treated the same as conventional offerings and would not be subject to additional taxes, despite the alternative vehicles used in Sharia-compliant transactions.

• On September 17, 2009, French parliament passed legislation to make issuance of SUKUK- Shariah compliant bonds for 1 Billion EURO.

• Amended the legislative structure known as FIDUCIE, Article 2011 of the French Civil Code relating to the formation of trusts. (still certain legal hurdles in the procedural approach and not the content of the legislation remains to be fulfilled).

Project to Pilot Islamic Finance in Ningxia

The Economic observer learned that China's Banking Regulatory Commission had given approval to Bank of Ningxia to undertake an Islamic financial services project. A source familiar with the matter said according to suggestions from regulatory bodies, the bank would likely set up a special department or create special service windows in its branches capable of providing Islamic financial services.

15

Islamic Banking in China

Lu Suping, the bank's chairman, told EO that establishing a special branch for Islamic finance was the bank's idea. A special branch would also be built and designed in an Islamic style and they would recruit a Muslim branch manager.

(The economic observer online, 23 June 2009)

• Thailand, a Buddhist majority country, an Islamic banking is fast catching on in Thailand, which has a sizeable Muslim population in the south of the country

• The Islamic Banking system in Thailand first started when the "Islamic window" concept was introduced by the Government Savings Bank in 1998.

• Established ISLAMIC BANK OF THAILAND (IBT) under a Special Act of Parliament in 2002, under the supervision of Ministry Of Finance.

Islamic Bank of Thailand

16Continued……

17

• The Thailand Islamic bank is cooperating with the Office for Small and Medium Enterprise Promotion and other government agencies to ease the liquidity problem of SMEs, with a loan target of 1,400 million baht a year. Measures and mechanisms have been worked out for transparent and systematic lending at an internationally accepted standard.

• A new export guarantee programme from the Islamic Bank of Thailand (I bank) is aimed at helping Thai halal food manufacturers conquer Middle East markets.

• the Islamic Bank offers loans as well as trade and investment advice on halal food because of the substantial size of the potential global market with a total value of about Bt6 trillion, a market that Thailand has only impacted minimally with just 1-2 per cent of the total market share.

• Issuing Sukuk to finance infrastructure projects which require an investment of US $50 billion (McKinsey).

• The National Australia Bank will structure an Islam-approved line of finance to make money from alternative methods. These include profit-sharing on the transaction, joint-ventures or leasing-type arrangements..

• For the trial's purposes NAB will pump $15 million from its not-for-profit finance division into the program, which will distribute the funds through various community finance schemes around the country. The bank will monitor the take-up and assess potential demand.

• The news comes just days after federal Assistant Treasurer Chris Bowen said that Australia could exploit international demand for Islamic finance to create more jobs.

Source: June 14, 2009, The Sunday Telegraph , Article by By Nick Gardner and Warner Russell on “Muslims get interest-free loans”

Islamic Banking in Australia

18

• Single legislation and regulator for banking system: Banking Act No.33 of 1988 and the Central Bank of Sri Lanka (CBSL)

• Banking Act was amended in 2005 to insert provisions on Islamic banking in Schedule II and IV

• CBSL issued a directive on Islamic banking in 2005

• Amana Investment Limited and Ceylinco Islamic Investment Corporation are the two Shariah compliant institutions in Sri Lanka

• There is no explicit provision on the Shariah governance framework 19

Islamic Banking in Sri Lanka

20

Islamic Banking in Korea• “There is a growing interest in Islamic finance in the Korean market.

Conventional credit is not enough, and we need to diversify our

sources of funding” said Lee Hyun-joo, the managing director of the global

capital markets division of Woori Financial Group, Seol, Korea.

• The government has also moved to amend its financial laws to

accommodate Sukuk issuance in the domestic market.

• The Parliament is discussing the draft, and bankers expect amendments

to be enacted by the end of this year.

21

Islamic Banking in Belgium• THE governor of the Banque centrale du Luxembourg, the central bank, Yves Mersch,

has called on European banking authorities to familiarize themselves with Islamic

banking

• Luxembourg is emerging as one of the more important domiciles for Islamic financial

products such as funds and sukuk, and is poised to become the first European Union

country to be an associate member of the Islamic Financial Services Board (IFSB).

• In April 2008, the government set up a multi-disciplinary task force charged with

identifying obstacles to the development of Islamic finance in Luxembourg and ways

to support its growth. Working groups on Islamic finance were also formed by the

Luxembourg Investment Fund Association (ALFI) and Luxembourg for Finance (LFF).

Continued……

22

• The government, revealed Mersch, has also instructed the tax authorities

to come up with proposals to have a level playing field and ensure tax

neutrality for Shariah-compliant transactions (essentially sukuk and

Murabaha)

• There are some 15 sukuk listed on the Luxembourg Stock Exchange with a

combined value of 5 billion euros; and over 40 Islamic investment funds,

largely equity funds domiciled in Luxembourg.

• In 2009, a major German bank also domiciled its new Islamic finance

platform in Luxembourg called Al Mi’yar to facilitate the issuance of

Shariah-compliant securities.

• Islamic banking is one of the fastest growing segments in financial services and opportunity abounds

• 70 countries practicing Islamic finance and banking including UK, Japan, Canada & Singapore and 715 banks across the world over $1.4 trillions assets under the system

• The Global credit crisis presents $1 trillion Islamic Finance industry with an opportunity to expand its appeal beyond devout Muslim investors as a haven from speculative excess.

(Reuters : ET Aug 16, 2008)

Islamic Banking Global scenario

23

1. No RIBA: No return of money on money / No increment above a debt or loan

2. No GHARAR: No Speculation, Short selling, ambiguity, uncertainity etc.

3. No MAYSIR: Gambling, transaction overly advantageous to one party, Conventional insurance, derivatives.

4. No KHABISAT: Moral Screening, Prohibits investment on casinos, pork, pornography, liquor, health hazard, environmental harmful products, Weapons of Mass Destruction.

Islamic Principles

Growth oriented, focus on investment, developmental and linked to production

PROHIBITIONS

PROMOTIONS

1. Encouragement of profit & loss sharing.

2. Encouragement for Public need and necessity.

1. Musharaka (Equity finance)2. Mudaraba (Agency finance)3. Murabaha (Working Capital finance)4. Ijara (Hire purchase)5. Salam (Advance purchase)6. Istisna (Project finance)7. Quard Hasan (Rehabilitation finance)8. Takaful (Mutual Insurance)9. Sukuk (Asset based -Bonds)

25

Conventional banks have since inception, had only one product – that is loan with interest, Shariah has unlimited products to suit every customer and every project under any circumstances

Dr. Hussein Hamid Hassan Chairman, Shariah Board, Dubai Islamic Bank

The Economics Times December 3, 2007

Islamic Products

Sukuk : Solution to US Sub-Prime Crisis• SUKUK : have been a significant driver behind the growth of the Islamic Finance market.

• Similar characteristics to conventional bonds, the difference being they are asset backed and

represent proportionate beneficial ownership of underlying assets.

• Returns are based on the yield generated by these assets.

• Multinational corporations, sovereign bodies, state corporations and financial institution have all

used international Sukuk issuance as an alternative to conventional syndicated financing.

(KPMG- Growth & Diversification in Islamic Finance)

• Sub-Prime mortgages

:Dubiously rated, collateralized debt obligation CDO

:Debt against debt, Remotely linked from the asset

More than $ 400 Billion losses to conventional banks

Islamic Bank virtually unscathed from the crisis

• SUKUK IS THE ANSWER TO THE SUB-PRIME CRISIS (Bahrain Tribune 19 Sept. 2008)

26

WHY NOT INDIA ALSO OPT FOR SUKUK ? • German state of Saxony – Anhalt became the first non-Muslims issues to tap the Global

debt market in 2004, raising sum 100 million euros via Sukuk issue.

• In US, The east cameron Gas company, Texas became the first entity to make a SUKUK

issue in order to attract demand from investors in the Gulf . The company sold US $ 165

million Sukuk backed by royalties from the companies hydrocarbon reserves off the coast

of the Gulf of Mexico.

• Jan 2009, Singapore launched $ 200 Million Shariah Compliant Sovereign Sukuk.

• November 2009, IFC*- International Finance Corporation –Word Bank Group issued IFC

Hilal Sukuk $ 100 Millions which has been rated Aaa by Moody’s

• The Sukuk global asset class has a market value of ever $ 200 billion.

*IFC is the first Non-Islamic Financial Institute to issue a Sukuk for term financing in GCC.

27

Current Trends

28

“Today’s Islamic finance industry is rapidly evolving from niche to mainstream, with growth of Islamic banking assets now estimated at $750bn and growing at a rate of 15% to 20% a year. The Gulf Co-operation Council (GCC) proportion of total Islamic banking assets has reached 30% and is projected to rise to 40% in the next three years. In Malaysia, the Islamic share is currently 12% and the government is committed to boosting this to 20% by 2010. In Islamic countries such as the United Arab Emirates (UAE), where less than 30% of the local population are Arabs, sharia-compliant banks are gaining market share at the expense of conventional banks”.

The spectacular acceptance and demand for Islamic finance means that within the next decade, the industry is likely to capture half the savings of the 1.6 billion-strong Muslim world. (The Banker: www.thebanker.com)

Indian Economic Scenario• An emerging global economic power house, next to U.S and

China.

• Average annual GDP growth is close to 8%.

• Has two stock exchanges that are among five largest in the world.

• Country has an enormous human resource with abundant technical and managerial talent.

• Half of Fortune 500 companies have their presence in India.

• Direct Investments, Portfolio Investments and Venture Capital Investments are on all time high.

29

Opportunities for India

• An estimated $ 1.5 trillion funds sloshing around the Middle East largely from higher oil prices. By 2020 will have $ 9 trillion to invest (Mc kenzie).

• About $ 800 billion Arab money has moved from the US and Europe to other regions after 9/11.

• The Investment commission identified 25 key sectors spanning infrastructure, manufacturing, services, natural resources and the knowledge economy. These require an aggregate investment of $ 500 billion.

• Financial capitals like London, Tokyo, Hong Kong are all becoming hubs of Islamic finance. Why not Mumbai and Cochin?

Date Projects Obligator USD Million Lead Arranger

December 2007Economic

Development Zone (EDZ)

State of Maharashtra 10,000 Gulf Finance

House, Bahrain

November 2007 SREI ProjectsSREI

Infrastructure Finance Ltd.

50HSBC

Amananh / Kuwait Finance

House

August 2007

Bearys Global Research Triangle

Bearys Groups 20Saudi Economic Development

Company(SEDCO)

July2007

Velcan Hydro Electric Dam

Velcan Energy Holdings 275 National Bank of

Dubai

October 2007

Energy City of India

State of Maharashtra 2,000 Gulf Finance

House, Bahrain

Islamic Finance Deals in India - 2007

Islamic Bank not Muslim specific• Islamic banking focuses on transparency, cooperative ventures, shared risk and

ethical investing attracts a wide range of both Muslims and Non Muslims alike. Can you afford to ignore it?

• In Malaysia, more than 40% of the investors & 60% borrowers are non-Muslims, mostly Chinese, in Islamic banks.

• One in five applicants for some of the Islamic products are non-Muslims in Islamic Bank of Britain.

• In Kenya, a predominately non-Muslims country, banks such as Gulf African Bank have indicated that as much as 20% of their customer base is Non-Muslims. Similarly the unbanked population is also declining, as access to finance is made more convenient.

(A New Financial Dawn: The Rise of Islamic Finance by Joseph Divanna & Antoine Sreih page No.16)

• Many of the Underlying principles investment strategies and objectives in the Ave Maria Catholic Values Fund are strikingly similar to those of Islamic alternatives.

(A New Financial Dawn: The Rise of Islamic Finance by Joseph Divanna & Antoine Sreih, Page No. 92)

32

33Perrine Fiorina Strategy Consulting for Financial Institutions

ISLAMIC BANKING & NON MUSLIMS

In addition to the large and untapped Muslim population, Islamic banking is currently beginning to attract non-Muslim customers, who are interested in this alternative way of banking. Indeed, a growing number of non-Muslims are turning to Islamic banking as customers, spooked by turmoil in the Western banking system increasingly see the sector as safe and more connected to the real economy. In my opinion, Islamic banking will benefit from this new consumers’ interest and grow even more quickly than it recently did.

34

VATICAN & ISLAMIC BANKING

The Vatican offered Islamic finance principles to Western banks as a solution for worldwide economic crisis.

"The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,"

(the Vatican's official newspaper L’Osservatore Romano said in an article dated 5th march 2009)

Islamic Investment Encourages Ethical & SRI Investing

• Indian join the globally growing ethical investing force with its Socially Responsible Investing (SRI).

• Ethical financing based on sharing approach, which will help uplift poor, prevent farmer suicides, help SMEs and cottage industries especially amongst the marginalised section of the society.

• SRI generally means putting money in companies with wholesome corporate values whose products and services don’t ruin the Human or The Earth, such funds are Christian and Islamic based.

• Financial experts foresee excellent potential ethical funds in India

• 60 per cent of the population does not have access to formal banking services and only 5.2 per cent of villages have bank branches. Reducing the numbers facing economic exclusion is critical for inclusive growth.

• In many emerging economies, Islamic financial institution are leading the way to provide services to under banked populations previously ignored by conventional banks.

(A New Financial Dawn: The Rise of Islamic Finance by Joseph Divanna & Antoine Sreih, Page No. 116)

Islamic banking for Under bankable population

36

(The Hindu, dated August 5,2009)

Dr. Raghuram Rajan committee (CFSR)Financial sector reforms committee report

Advocates Interest Free banking“Another area that falls broadly in the ambit of financial infrastructure for inclusion is the provision of interest-free banking. Certain faiths prohibit the use of financial instruments that pay interest. The non-availability of interest-free banking products (where the return to the investor is tied to the bearing of risk, in accordance with the principles of that faith) results in some Indians, including those in the economically disadvantaged strata of society, not being able to access banking products and services due to reasons of faith. This non-availability also denies India access to substantial sources of savings from other countries in the region. 37

38

While interest-free banking is provided in a limited manner through NBFCs and cooperatives, the Committee recommends that measures be taken to permit the delivery of interest-free finance on a larger scale, including through the banking system. This is in consonance with the objectives of inclusion and growth through innovation. The Committee believes that it would be possible, through appropriate measures, to create a framework for such products without any adverse systemic risk impact.” (Chapter 3: Broadening Access to Finance Page:35)

High Level Committee of Planning Commission of IndiaReport submitted to Chairman, Dr. Manmohan Singh, PM on Sept 12th, 2008

What Marginalized & Muslims need?• India is growing, but not Indians. A large section of the

population is left out of the prosperity net. The poor and marginalized yet to get benefits from economic reforms.

• The exclusion from formal financing is even more for the Muslim community, as per the Sachar committee & Dr. Arjun Sengupta committee reports.

• On the supply side there are plenty of funds, both from the Muslim community in India as well as High Net Worth Indian (HNI’s) Muslims from the Middle East.

• There is desperate shortage of equity and lease financing for micro and small Enterprises. 39

“India has the potential of emerging a significant market for ISLAMIC BANKING provided there is a favorable change in the regulatory environment & increased awareness among Muslims and India as a whole.”

GRAIL : US market intelligence & data analysis provider

The Stateman, August 9, 2008 40

Potential for Islamic banking in India

Mr. Rahman Khan - Pilgrimage Shariah Compliant Fund

41

• High level committee - PM’s office, chaired by Mr. Rahman Khan, Deputy Chairman, Rajya Sabha - recommended favouring a Shariah Compliant Investment Scheme to fund Hajj Pilgrimage like TABUNG Haji in Malaysia is under consideration since 2006.

• As a test case, if it succeeds, then full fledged Islamic banking can be introduced.

Discussion with Dr. Isaac Thomas, Finance Minister, Kerala

about feasibility of Islamic Banking & Investment in India

42Kerala Bhavan, New Delhi

March 8, 2009

• Kerala State Industrial Development corporation (KSIDC) appointed M/S Ernst & Young (P) Ltd, Mumbai and prepared a feasibility report for formation of Islamic Investment company. (June 2009)

• Launched with a share capital of Rs.1000 crores

• KSIDC will have 11% share and remaining 89% from private investors.

• Aims to grow into a full fledged Global Islamic Bank

Kerala Govt. Promotes Islamic investments

Interaction with Salman Khursheed

44

Minister for Minority and Corporate affairs 15 June 2009

Meeting with Deputy Governor RBI

45

A delegation of Indian Centre for Islamic Finance (ICIF), consisting of its General Secretary, H Abdur Raqeeb and two of its trustees Dr. Rahmatullah (Chairman, AICMEU) and Mr. KM Abdul Salam, (Director, AICL & former Manager of RBI) met Dr. K C Chakrabarty, Deputy Governor, Reserve Bank of India, at the RBI headquarters in Mumbai on 11 September 2009

• Presented a memorandum along with the important documents of FSA, Lovells, IMF working paper, HM Treasury’s, etc.

• The Deputy Governor said that RBI is not against Interest-free Banking but needs a regulatory amendment by the government through the Parliament to include the same.

September 11, 2009

Meet with Finance Minister

46

A memorandum was submitted to Finance Minister, Shri Pranab Mukerjee

on the Interest free Islamic Banking in India on 24 October 2009 in Kolkatta.

• RBI should re-examine its stand on Interest Free Finance and Govt. of India should amend the regulations to accommodate Interest Free Banking / Windows as per the recommendation of Raghuram Rajan Committee Report.

• IRDA should permit Takaful (mutual insurance).

• Govt. should form an Expert Group on Islamic Finance (EGIF) as in UK from industry, citizens, professionals, representatives from marginalized and Muslim organizations.

NEED OF THE HOUR

47