November 16, 2017

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Islamic Banking proposal suggested by Financial Sector Reforms rejected by RBI

In its recent decision, RBI made it clear the Islamic banking proposal would not be implemented, as equal banking access along with all financial services has already been made available to all citizens of the country. Islamic banking system involves no interest being charged as it is prohibited by Islam. The decision came in response to an RTI query.

On the lines of the Jan Dhan Yojana, which was launched in the year 2014 to include financial incomes of all households across the nation, the Financial Sector Reforms gave the suggestion of implementing Islamic Banking. The committee was headed by Raghuram Rajan, the former RBI governor, and emphasized on the interest free banking system.

An Inter-Departmental Group (IDG) which was set up within the RBI looked into the technical, legal, and regulatory issues of the said system and then submitted the reports to government. A copy of the report was also submitted in the Finance Ministry along with a recommendation of gradually introducing the Sharia compliant baking system in conventional banks.

According to RBI, the decision has been taken after taking into account all the opportunities that are available to the citizens on a wider scale, in regards of the financial and banking services. 


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