As per The Banking Regulation Act, 1949, it is legally prohibited in India to run a banking system that isn’t based on ‘interest’. Till recently, it was possible for an Indian citizen to live a normal life in India without being dependent on the banking system. The citizen had the option of earning the income in cash and he/she could have spent the cash easily for daily needs and saved the cash too. However, in last few months, Indian government has taken some drastic measures to scale-down the “cash economy”, forcing all earning citizens of India to have bank accounts. Payments to various services are now possible only through banking means. Also, those who have cash in the two large currency denominations (1000 & 500 rupees) were forced to deposit the currency notes in the banks after government demonetised both the currency notes. Indian Government’s primary intentions in enforcing the modern banking system were to reduce black money and ensure citizens are paying taxes.
Devoted Indian Muslims who had stayed away from the interest-based banking system in India are now under tremendous dilemma. Islam strictly prohibits Interest-based banking systems. Holy Quran explicitly urges the believers to give up interest and declares war against those Muslims who indulge in interest based transactions.
“O ye who believe! Fear Allah and give up what remains of interest, if you are truly believers. But if you do it not, then beware of war from Allah and His Messenger; and if you repent, then you shall have your principal; thus you shall not wrong nor shall you be wronged” – Holy Quran, Chapter 2, Verse 278-279.
India explicitly prohibits non-Interested based Banking systems as per The Banking Regulation Act, 1949. The Union Finance Ministry of India has previously stated that, Islamic banking has no relevance in India. Reserve Bank of India (RBI) has repeatedly sent out PR material in favour of Islamic banking but never really committed anything concrete for Islamic Banking. As per latest reports, there are no timelines set by RBI for introducing Islamic Banking in India.
The most worrying aspect in this issue is the deafening silence of Indian Muslim scholars. The very same Indian Muslim scholars have been tremendously active in safeguarding their rights in issues such as uniform civil code, triple talaq, etc. but have remained absolutely silent on this matter. All Indian Muslim Personal Law Board (AIMPLB) has made no recommendation to the Indian government in this matter.
“I doubt Indian Muslim scholars have intellectual quotient to understand Islamic Banking. I am not sure it’s even taught at Indian Madrasas. Moreover, families of prominent Muslim politicians such as Asaduddin Owasi are running interest-based banks in India. So, no wonder they are silent. There is strong need for a university exchange programmes between Indian Madrasas and foreign universities in Malaysia, Saudi Arabia, etc. This will help Indian Muslim scholars to learn about Islamic banking and hopefully bring back those learnings to India” said a civil society member from India, who want to remain anonymous.
Islamic Banking can not only help Indian Muslims but can also solve several problems in India which are caused due to capitalistic interest based economy. Several thousand farmers have committed suicides in India because of their inability to pay back the interests taken for the loans. Interest-free loans via Islamic banking can save thousands of lives in India. Islamic Banking will also open up investors from Middle-East and South Asian countries, opening up India to multi-trillion dollar Islamic Financial market. It remains to be seen, whether Indian Government makes a quick decision on Islamic Banking or not.