IslamicFinance.de

D. Subbarao, governer of RBI, explains that because of legal issues, Islamic banking will not be possible in Kerala. This is the only state in the country which has been striving for introduction of Islamic banking. RBI has already addressed Indian government on the matter pointing out the necessary amendments. Subbarao further suggests that the restriction on Islamic banking could have a work-around through other models instead of banking. These have been proposed to the government of Kerala.

Kerala is going to be the host of a national seminar on interest-free institutional mechanism for banking, finance and insurance on July 4.
Chief Minister Oommen Chandy will be the on to open the seminar.

Kerala offers huge potential for setting up financial institutions based on Islamic tenets, given its strong historical ties with West Asia and a large Muslim population that adheres to investment norms prescribed by Sharia. Islam prohibits giving or receiving of interest, which it categorises as usury. It does not prohibit trading and investment but advises followers to share risks. It tells the investor to share the loss, just as he would have shared the profit, in case the investment makes a loss. The West has successfully repackaged this investment process as Islamic banking. Kerala is trying to follow that path.