NEWHORIZON Shawaal 1437 to Rabi al awwal 1438 26 IIBI www.islamic-banking.com
NEWHORIZON July – December <strong>2016</strong> UPDATE ON INDIA At a later stage Mr Patra questioned why Mr Owaisi was emphasising the religious identity of the hardship when he could be saying that the poor are going to face greater hardship as a consequence of demonetisation. Mr Patra was asked by the panel moderator later in the debate to clarify the position of the BJP ruling party on Islamic banking, because there were confusing media reports. He said that the government would emphasise financial inclusion and had clarified that there was no need for Islamic banking. On the objective of financial inclusion for which Islamic banking was explored by the Reserve Bank of India, Mr Patra said that this had no relevance as the government already had other means of financial inclusion like the Jan-DhanYojana (the People Money Scheme for Financial Inclusion launched in August 2014 by India’s Prime Minister). This was intended to ensure access for excluded sections of society, e.g. the very poor, to various financial services, such as the availability of basic savings accounts and credit, remittance facilities, insurance and pensions in an affordable manner. The arguments on both sides of the debate on the operation of Islamic banks in India were heated at times and the subject of allowing Islamic banking in India dominated most of the discussion programme. Mr Owaisi pointed to countries such as Japan, Britain, Singapore and the USA that have opened their doors to Islamic banking. He also referred to the news reports that India’s Prime Minister Nahendra Modi, during an April <strong>2016</strong> visit to Saudi Arabia, had signed an agreement with the Islamic Sambit Patra Corporation for Development (ICD), a subsidiary of the Saudi Arabia-based Islamic Development Bank (IDB), which would ostensibly have allowed the ICD to set up a branch in the Gujarat city of Ahmedabad. The ICD branch would operate as a non-banking financial company (NBFC), providing loans to small and medium businesses and sharing their profits and losses, instead of charging interest, a corner stone of Islamic banking. No date for opening of the branch was given. Ms Barkha Dutt, the panel moderator, requested Professor Emeritus Tharailath Koshy Oommen who was also on the panel to offer his point of view. Professor Oommen is an Indian sociologist and former member of the Sachar Committee, commissioned in 2005 by the Indian government to report on the social, economic and educational conditions of the Muslim and other socially and economically backward classes in India. He said that the report submitted in 2006 by the Sachar Committee as well as the findings of the (Ranganath) Misra Commission constituted by the Indian government in 2004 contained ample evidence that these communities were being disadvantaged, even before the issue of demonetisation arose. He also pointed out that there was undoubtedly a deficiency in the financial infrastructure in Muslim areas, although there is as yet no empirical data to show just how demonetisation is playing out on the ground. Mr Patra, the BJP spokesperson, blamed politicians representing minority areas for not pushing the development of infrastructure in those areas and the community for not encouraging people to become familiar and comfortable with digital technology, particularly ATMs. He suggested that the leaders of the Muslim community had chosen to focus on the issue of Islamic banking at the expense of more financial inclusion. Professor Rakesh Sinha, a political scientist, was brought into the debate. He referred to Mr Owaisi’s Private Members’ Bill on Islamic banking, which Mr Owaisi had tabled in the Indian Parliament and also referred to the representation given by Mr Owaisi himself that Muslims avoid mainstream banks, because the Indian financial system is based on interest-taking and interest-giving. When the panel moderator pointed out that there was a lot of confusion on the government’s position on Islamic banking and quoted the report in the Indian Express on the Prime Minister’s visit to Saudi Arabia, Professor Sinha said that in an Indian context Islamic banking is unacceptable, because India is a secular democracy. He added that people could choose to put their money in Indian banks and not take interest. He went on to mention that 4,200 companies out of 6,000 companies listed on the Bombay Stock Exchange were Shari’ah compliant (the number might have been exaggerated, no evidence was provided). If Islamic banking came to India Mr Sinha was adamant that the conversion rate (meaning conversion to Islam) would go up (he did not back his statement with any data). He went on to say that Islamic banking would be the battleground for the large scale conversion of the poor people on economic issues and that minority categorisation is a dangerous issue. He further said that there was no provision in the Indian constitution for reservation on the basis of religion and the government was not going to change the constitution on the basis of reservation. He also felt that such a move would be divisive for Indian society and pointed to The Muslim Cooperative Bank established in Pune www.islamic-banking.com IIBI 27
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