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| Spotlights on Islamic banking instruments | | Assets controlled by Muslims are 1.5 trillion dollars | | B L KAK
NEW DELHI, AUG. 31: Banks in India and elsewhere in the world are reported to have begun to eye the vast assets controlled by Muslims. According to one estimate, these assets are worth 1.5 trillion dollars. If this estimate were any guide, the assets are growing at 15 per cent per year.
Mind-boggling figures have been put out with regard to Islamic bonds. It has been reported that Islamic bonds collected in 2004 were to the tune of 30 billion dollars. Islamic bonds of about 20 billion dollars have been collected during the first seven months of this year. Malaysia, which has friendly ties with India, has already emergted as the hub of Islamic banking. Malaysia’s importance is also because of it being the headquarters of Islamic Financial Services Board. It is said that nearly 265 Islamic banks across 40 countries have assets worth 262 billion dollars.
The government of India has appreciated the idea of a viable mechanism which will help unlock Islamic deposits. It is, obviously, in this context that a special committee of the RBI (Reserve Bank of India) has begun to conduct an in-depth study of instruments of Islamic banking. The committee has to submit its report to the Government, before any non-controversial mechanism is put in place.
The committee was set up last July. It has not fixed a deadline for the completion of its task. At this stage, in the absence of a proper study of the instruments of Islamic banking, the RBI top echelons hesitate to say if the banking regulations in the country can undergo changes. At the same time, RBI’s banking operations and development wing has reckoned that trends across the world show the change.
It has been pointed out that offering financial products and services that conform to Islamic principles can lead to unlocking of large financial capital that believers are unable to invest. It is reported that thousands of crores of rupees earned in interest in Kerala alone is kept in ‘suspended accounts’ as believers do not claim it. Imtiaz Ahmad, formerly of Jawaharlal Nehru University, has been quoted as saying: “This money could be above Rs 40,000 crores”.
According to some experts, it is not difficult at all to introduce in India Islamic banking divisions, on a bigger scale in a phased manner. There are banks such as Standard Chartered and HSBC that have Islamic banking divisions. If this does work as per their calculations and requirements, can Indian banking regulators be far behind in catching up?
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