On Tuesday, February 21, Nara Lokesh, the National General Secretary of the Telugu Desham Party (TDP) promised to establish an Islamic bank if the party comes to power in Andhra Pradesh.
After a two-day break, he began his padayatra, “Yuva Galam,” on Tuesday. Nara Lokesh spoke with Muslim community representatives in Srikalahasti, Tirupati district, and reminisced how N T Rama Rao, the TDP’s founder, established the Minority Corporation. Lokesh also claimed that CM Jagan Mohan Reddy has discontinued all the welfare schemes launched by the prior TDP government and promised to restore them if voted to power.
Following this, the Andhra Pradesh unit of the Bhartiya Janata Party (BJP) slammed the TDP leader calling the promise to set up an Islamic Bank an ‘ill-conceived’ move. In a statement released on Wednesday, the BJP leader Duddakunta Venkateswara Reddy said, “We want to know if Nara Lokesh actually knows anything about Islamic Bank.”
Claiming that even the Reserve Bank of India (RBI) has earlier opposed the proposal of setting up an Islamic Bank, the BJP leader asserted that “while the BJP is trying to unite the country divided on religious lines as the Central government is restoring the original names changed during the colonial rule to propagate a feeling of national unity, the TDP leader is talking about Islamic Bank.”
Moreover, Reddy stated that the TDP leader’s statement regarding Islamic Bank has hurt the sentiments of the Hindu community.
#IslamicBank…ఎందుకు..!
— Duddakunta Venkateswara Reddy/వెంకటేశ్వర రెడ్డి (@DuddakuntaBJP) February 22, 2023
షరియా చట్టం…! షరియా పాలన తీసుకొస్తామని హామి ఇవ్వండి…? @naralokesh గారు..? ఇంకా నయం @JaiTDP కి ఓట్లు వేయండి..! మా నాన్నను ముఖ్యమంత్రి చేయండి..! తర్వాత నన్ను ముఖ్యమంత్రిని చేయండి..! ఈ రాష్ట్రంలో మీకు షరియా చట్టాన్ని అమలు చేస్తానని చెప్పలేదు.! pic.twitter.com/BKluH6b7z3
Islamic Banking
Islamic banking is a form of banking that complies with Sharia laws which prohibits charging interest or Riba. Islamic banking claims to offer interest-free banking and functions on the principles of the Quran.
The Islamic banking system needs to upsell goods in order to turn a profit. For instance, if a consumer needs a loan to buy something, the Islamic bank will buy it and resell it to the customer at a higher price. This loophole allows Islamic banks to earn profits from customers without really charging interest on loans or other payments.
A major concern regarding Islamic banking is that Islamic banks can grant or deny funds to customers depending upon their interpretation of the Quran. Such banks may also indulge in furthering radical Islamist propaganda by funding extremist activities.
Sharia Index and Sharia Mutual Funds
Interestingly, although RBI disallowed Islamic Banking, there are Sharia Index in India that can be defined as an index of companies that are compliant with the Shariah Law. These companies are screened by an authorized board before getting listed in the indices. In India, there are four main indices that index Shariah-compliant companies that are S&P BSE 500 Shariah Index, BSE Tasis Shariah 50 Index, the Nifty 500 Shariah Index, and the Nifty 50 Shariah Index.
In the market, there are also mutual funds that adhere to Sharia. The top three mutual funds in this category are Nippon India ETF Shariah Bees, Taurus Ethical Fund, and Tata Ethical Fund. Such Sharia-compliant funds mostly include those companies that adhere to the principles ordained under ’Halal’. Sharia-compliant mutual funds don’t invest in companies engaged in businesses not permissible under Islam, such as alcoholic beverage companies.
Controversies around Islamic Banking in India
A Shariah Complaint window, commonly referred to as Islamic Banking or Sharia Banking, was recommended by the Reserve Bank of India in 2016. The idea was scrapped later in 2017 after receiving severe criticism and the center’s lack of interest.
Mukhtar Abbas Naqvi, the minister for minority affairs, had remarked at the time, “India is a secular and democratic country, and the government will not permit Islamic banking.”
“The current financial system is open to all, and there are many government and scheduled banks. Thus, the government is not considering implementing the idea of Islamic banking. We have no intention of introducing Islamic banking, notwithstanding suggestions from some organizations and individuals,” he stated.
In 2016, an RTI was filed where a copy of the letter was sent by the Finance Ministry on the recommendations of the Inner Department Group regarding Shariah Banking. The Ministry rejected it under Section 8(1)(c) of the RTI Act.
The idea for Islamic Banking was first proposed in a report titled A Hundred Small Steps prepared by a high-level committee on Financial Sector Reforms headed by Raghuram Rajan in 2008.
The report made a reference to Islamic banking although it did not use the terms Sharia-compliant banking or Islamic banking. It was stated that several religions forbid the use of interest-bearing financial instruments, which strongly suggests Islam since Islam is the only religion where receiving interest on money is prohibited.
Several cases wherein operators of Sharia-compliant Muslim Fund or ‘private’ banks have duped Muslims have been reported.
In January this year, a Muslim Fund operator in Uttarakhand’s Jwalapur ran away along with crores of rupees that were deposited by thousands of Muslims in the ‘Muslim Fund’. Abdul Razzaq, the accused in the case was running an interest-free transaction office in Jwalapur in the name of the Muslim Imdadi Fund for the last 10 years. Thousands of Muslims, including those in Jwalapur and the surrounding areas, have opened accounts with him and daily contribute a portion of their income to the fund.
Notably, a similar case was reported in Uttar Pradesh’s Bijnor in April last year, wherein Bijnor Police arrested a person identified as Mohammed Faizi. He had absconded after duping customers of the Muslim faith of crores of rupees in the name of a ‘Sharia-compliant Muslim Fund’ named Al-Faizan Muslim Trust.
