In a fresh move, the Reserve Bank of India (RBI) has said that it is open to the idea of interest free Islamic banking in the country, which can give a big boost to the Indian economy.

In a Right to Information (RTI) reply, the Central bank has said that an “Islamic window” can be opened in conventional banks for gradual introduction of Shariah-compliant, interest free banking in the country.

“It has been suggested by the RBI that a few products similar to conventional banking products may be considered for introducing through the Islamic window of conventional banks after necessary notification by the Government,” the RBI said in a reply to Bangalore-based Pradeep’s petition. “The Ministry of Finance, during 2013, had requested the RBI to give its considered opinion regarding the feasibility of introducing Islamic banking in India after examining all the legal, technical and regulatory issues relating to the matter. Subsequently an Inter-Departmental Group (IDG) on Islamic Banking was constituted in RBI and the report prepared by the Group has been submitted to the government during February 2016,” the reply said.It further said that the RBI has also forwarded a Technical Analysis Report based on the recommendation of the Group to the government during December 2015. The RBI’s suggestion is based on the recommendations of the IDG.

Though the stand of the government is not known, senior BJP leader Subramanian Swamy opposed the proposal. Asked to comment on the RBI’s proposal of opening an Islamic window, he told The Sunday Guardian: “They can for all of RBI existence. The RBI Act bars the RBI. If they bring an amendment in Parliament, then it will be anti-national and betrayal of Hindutva. We will defeat that.” Interestingly, it was Swamy’s letter about two years ago which led to the suspension of the launch of State Bank of India (SBI) Shariah Mutual Fund, which was designed to invest in Shariah (Islamic law) compliant companies, at the eleventh hour. Swamy had written a letter to Prime Minister Narendra Modi, saying that the decision would be “politically and economically disastrous for our country”. There have been proposals to change the name of Islamic banking so that it does not create any kind of confusion among the majority community. “It can be termed as India Mutual Fund or Saajhedari. Nomenclature should not become a hindrance to introduction of Islamic banking, which has got immense potential. The Public Investment Fund of Saudi Arabia, for example, is ready to invest $2 trillion in different projects all over the world,” said H. Abdur Raqeeb, convenor of the National Committee on Islamic Banking. In yet another RTI reply to a news agency, the RBI said that “given the complexities of Islamic finance and various regulatory and supervisory challenges involved in the matter and also due to the fact that Indian banks have no experience in this field, Islamic banking may be introduced in India in a gradual manner”. “Introduction of full-fledged Islamic banking with profit-loss sharing complex products may be considered at a later stage on the basis of experience gained in course of time,” the RBI told the Finance Ministry.