NH-2016-q2

UPDATE ON INDIA
NEWHORIZON Shawaal 1437 to Rabi al awwal 1438
Rakesh Sinha
with a presence in different areas; the
bank charges interest on loans and pays
interest on deposits. Professor Sinha’s
position was that, if Muslim community
leaders like Mr Owaisi stopped lobbying
for a religion-driven Islamic banking
system, there would be more public
sector banks. He blamed Mr Owaisi
for not encouraging financial inclusion
by asking the government to open
more public sector banks and for not
encouraging more Muslims to open
bank accounts with them.
Ms Barkha Dutt, the panel moderator,
put it to Mr Owaisi that the position
raised by Mr Patra and Mr Sinha was
that he should be lamenting inequality
and encouraging financial inclusion
by asking more people to open bank
accounts rather than lobbying for a
religion-based banking system such
as Islamic banking. She did, however,
acknowledge that there was enough data
to demonstrate clearly that Muslims did
not have a level playing field when it
came to access to the banking system.
Mr Owaisi responded by alleging
that the position of Mr Patra and Mr
Sinha was due to their ignorance and
mentioned a scheduled bank called
Darussalam (Co-Operative Urban)
Bank, Hyderabad (he is the bank’s chief
patron) with many branches, which
is operating on the basis of interest.
He also said he had campaigned on
behalf of Jan-DhanYojana, the Prime
Minister’s financial inclusion scheme.
He then made reference to two Reserve
Bank of India (RBI) reports, a World
Bank report and the Ministry of Micro,
Small and Medium Enterprises (MSME)
report that came after Jan-Dhan
(implying the reports still viewed the
positive potential of Islamic banking
for India).
On the Private Members’ Bill on
Islamic banking-tabled in Parliament,
Mr Owaisi said that it was because there
is huge potential if Islamic banking
was introduced in India and that
infrastructure development in India
would increase (suggesting the potential
for mobilising additional deposits by
Islamic banks for investment). He
backed his statement by naming France
which has allowed Islamic banking.
He also mentioned that many British
universities are offering MBAs in
Islamic banking. He made further
mention of the Prime Minister’s visit to
Saudi Arabia in 2016 and the signing of
an agreement with a Saudi bank.
Ms Barkha Dutt, the panel moderator,
interjected asking Mr Owaisi to explain
whether it was not a contradiction
to want both financial inclusion for
Muslims in the regular banking system
and also to want a parallel Islamic
banking system. Mr Owaisi did not
see any contradiction in this position;
he reiterated that his interest in Islamic
banking was that there is a huge
potential for India’s infrastructure
problems to be solved. He explained
that Muslims who do not take interest
could open their accounts with
Islamic banks and become partners
in the infrastructure development of
India (implying that greater deposits
mobilised through Islamic banks would
go into the Indian banking system). He
went on to further explain that Muslims
do not take interest from banks, but if
they were to put their money in Islamic
banks they become partners in the
infrastructure growth of India (through
a profit-sharing arrangement employed
by Islamic banks under which the
depositors would not be paid interest
but receive a share on the investment
profits). Mr Owaisi contended that
when he was arguing to open more
banks and more accounts he was not
pursuing a ‘communal’ issue. He
said that the Indian government was
missing the huge opportunity that
Islamic banking represented for the
country, because of its intransigence
in relation to anything with an Islamic
label attached to it.
Professor Oommen was also asked by
Ms Barkha Dutt, the panel moderator,
whether he saw a contradiction in
asking for Islamic banking and also
asking for greater inclusion in the
existing banking system. He replied,
not necessarily. His position was that
the discussion on Islamic banking
was not one of facts, but largely of
perceptions and certainly there was a
relationship between the two. He said
that the largest section of the Indian
economy is in the informal sector
(referring to the cash economy) and
the instruments being talked about
were, therefore, largely irrelevant.
He asserted that what mattered was
whether an instrument could bring
about what was called financial
inclusion be it Islamic banking or
Marwari banking. (Traditionally the
Marwaris were money-lenders and
represent an ethnic group that originate
from the Rajasthan region in India.)
He emphasised that the divide about
the instrument (Islamic banking) in this
particular context was an ‘ideological’
and ‘perceptual’ divide and in his mind
what was important
was to look reality
squarely in the
face and see how
everyone can tackle
it. He questioned
whether it mattered
Prof. T. K. Oommen
28 IIBI
www.islamic-banking.com