Saturday, December 19, 2009

Interest-free system: Comprehensive change needed in Indian banking laws

Comprehensive change is needed in the Indian banking laws in order to implement interest-free economic system, said famous Islamic banking scholar Mufti Abdul Qader Barkatullah. It is difficult to bring full-fledged Islamic banking in the present conditions in India.

Mufti said that majority of the countries followed economic systems that were about half a century old. But, living conditions and development ideas have moved a lot forward. Change is needed in economic matters also as per the change in the other fields.

India is following the laws of Britain in the banking field. Indian banks cannot invest capital in trade and others as in Britain. At the same time, interest is given to the investors and levied from those who take loans making rupee a good for trade.

Money is not a good for trade in the Islamic banking idea. Islamic banks distribute the profit from re-investing the money of the investors in business activities and the like. And so, investors are responsible to share chance of loss also along with profit. But, the chance of loss is not shared with investors in the traditional banking system.

The global economic downturn has not affected the Islamic banks in Britain much, said Mufti who is the Islamic financial adviser of several famous banks in Britain. The relevance of the Islamic banking system increased in the UK when a good percentage of investments turned to interest-free banking and a considerable share of investments came from the Gulf regions. As a result, the Islamic Bank of Britain was established in 2004. The bank has opened seven branches within five years.

The relevance of such banks is increased by the fact that about 20 percent account-holders are non-Muslims. Mufti added that investing in the real estate field and others, where scope of loss is comparatively less, would be better for those working on the field of Islamic banking in India.