NH-2016-q2

NEWHORIZON July – December 2016
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 2016
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