New Delhi, March 14: Reserve Bank of India (RBI) has not given any permission to Saudi Arabia’s Islamic Development Bank (IDB) to start its operation in India. Apex Bank respond in Right to Information (RTI) filed BJP leader Subramanian Swamy on last Monday. Notably, Islamic or Sharia banking is a finance system based on the principles of not charging interest, which is prohibited under Islam.
RBI said that, our Hyderabad Regional Office had undertaken an incognito visit to the IDB’s office situated there. It was observed that the office had not displayed any board indicating name of the bank and was not undertaking any banking activities. They were acting as a nodal agency, collecting application forms for students to forward to Muslim Education Trust.
Our concern arising out of the reported operation of IDB in India was communicated to Saudi Arabian Monetary Authority (SAMA) who informed that the Islamic Development Bank (IDB) is a multi – lateral financial institution having headquarters in Jeddah, Saudi Arabia and is not supervised by them. They had requested to take up the mater directly with the institution. Accordingly, RBI is in correspondence with IDB in the matter,” RBI added.
RBI also said that they have contacted their counterparts in Saudi Arabia for information regarding IDB. Saudi Arabia’s monetary agency requested RBI to take up the matter directly with IDB, said the central bank.
Meanwhile many newspapers widely reported that IDB was going to open a branch in Gujarat and going to function according to the rules of Sharia. RBI had set up an inter-departmental group on Islamic Banking. Entire exercise was aimed at promoting financial inclusion, accessing huge market potential to attract finance from Gulf countries for infrastructure development.
It could be noted that in late 2008, a committee on Financial Sector Reforms, headed by Raghuram Rajan had opined the need for a closer look at the issue of interest-free banking in the country.
The committee had said, “Certain faiths prohibit the use of financial instruments that pay interest. The non- availability of interest-free banking products 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.”