RBI Governor D Subbarao rules out introduction of Islamic banking

Islamic-bankingReserve Bank of India (RBI) on Thursday ruled out the possibility of introducing Islamic banking in the country, saying such banking required a separate law.

RBI Governor D Subbarao said that they had studied the issue and appreciated the objectives behind the request for Islamic banking but there were some legal problems in introducing such banking.

Responding to a query on the issue, Subbarao said, "Islamic banking is not possible. We have studied the issue. We appreciate the objectives behind the request. But there are some legal problems."

Subbarao also said that Kerala Chief Minister Oommen Chandy had told the central bank that there were numerous NRIs in the southern Indian state who wanted to make contributions to the development of the state and that thus demanded a special mechanism for channelising their funds.

The RBI Governor ruled out the introduction of Islamic banking but assured that the central bank could consider other methods for channelising funds based on the principles of Islamic law.

When asked about inflation, Subbarao refused to comment. He just said that he would talk about inflation sometime later. He added that the central bank's next mid quarter monetary policy meeting to review rate would take place on December 18.