Kerala government gets Reserve Bank of India nod for Islamic banking-
ET-19th August 2013
T Ramavarman
KOCHI: The Kerala government has got a go-ahead from the Reserve Bank of India to launch a financial institution following the principles of Islamic finance.
Cheraman Financial Services Limited(CFSL) will be floated by Kerala State Industrial Development Corporation to function as a non-banking finance company (NBFC). A formal announcement on CFSL, the latest incarnation of Al Baraka Financial Services, was made on Saturday.
Industries minister PK Kunhalikutty and CFSL chairman P Mohamad Ali told reporters here that the firm would function as a non-banking finance company with an authorised capital of Rs 1,000 crore.
CFSL has already received clearances from the RBI, the Securities and Exchanges Board of India ( SEBI) and the wakf board, the chairman said.
The Kerala State Industrial Development Corporation ( KSIDC) will be the single largest shareholder in the company, holding 11% shares. The other individual shareholders can hold a maximum of 9% shares.
Counting on the state's traditional Gulf links, the previous government had hoped to raise Rs 40,000 crore. The Sharia-compliant CFSL will launch road shows in various cities of India and the Gulf countries from next month
The body will desist from charging interest on loans or give interests on deposits. It will target sectors like infrastructure, services and manufacturing sectors and keep off taboo areas including liquor, tobacco and gambling or speculation. Financing start-up projects is one of its pilot programmes.
The firm will float an alternative investment fund under the banner of Cheraman Fund, with a corpus of Rs 250 crore. The fund will focus on manufacturing and service sectors, mainly in Kerala.
Initially, the fund will raise about Rs 50 crore and one of the early projects to be taken up will be to provide support to startup schemes, managing director APM Mohammed Hanish said.
KOCHI: The Kerala government has got a go-ahead from the Reserve Bank of India to launch a financial institution following the principles of Islamic finance.
Cheraman Financial Services Limited(CFSL) will be floated by Kerala State Industrial Development Corporation to function as a non-banking finance company (NBFC). A formal announcement on CFSL, the latest incarnation of Al Baraka Financial Services, was made on Saturday.
Industries minister PK Kunhalikutty and CFSL chairman P Mohamad Ali told reporters here that the firm would function as a non-banking finance company with an authorised capital of Rs 1,000 crore.
CFSL has already received clearances from the RBI, the Securities and Exchanges Board of India ( SEBI) and the wakf board, the chairman said.
The Kerala State Industrial Development Corporation ( KSIDC) will be the single largest shareholder in the company, holding 11% shares. The other individual shareholders can hold a maximum of 9% shares.
Counting on the state's traditional Gulf links, the previous government had hoped to raise Rs 40,000 crore. The Sharia-compliant CFSL will launch road shows in various cities of India and the Gulf countries from next month
The body will desist from charging interest on loans or give interests on deposits. It will target sectors like infrastructure, services and manufacturing sectors and keep off taboo areas including liquor, tobacco and gambling or speculation. Financing start-up projects is one of its pilot programmes.
The firm will float an alternative investment fund under the banner of Cheraman Fund, with a corpus of Rs 250 crore. The fund will focus on manufacturing and service sectors, mainly in Kerala.
Initially, the fund will raise about Rs 50 crore and one of the early projects to be taken up will be to provide support to startup schemes, managing director APM Mohammed Hanish said.
http://economictimes.indiatimes.com/news/economy/finance/kerala-government-gets-reserve-bank-of-india-nod-for-islamic-banking/articleshow/21890211.cms
First Sharia-based NBFC to open in Kerala after RBI nod
MUMBAI: After refusing to allow Islamic banking in the country for long, the Reserve Bank seems to have moved closer to changing its stand by permitting the state-runKerala Industrial Development Corporation to launch an NBFC that will offer services compatible with Sharia law.
"The RBI has permitted KSIDC to float a non-banking finance company and offer products based on Islamic finance principles," the Central bank spokesperson Alpana Killawala told PTI here today.
Outgoing Governor Duvuuri Subbarao, who is retiring on September 4, had earlier said that Islamic banking was not possible in the country.
"Islamic banking is not possible in the country as there are some legal problems," Subbarao had said last November and added that RBI could look at other avenues to help productively channelise the huge NRI funds.
Under the Islamic banking norms, depositors do not get interest on deposits, nor can the banks charge interest to its borrowers. Banks can invest the money, but keep off tabooareas like liquor, tobacco and gambling or speculation.
Similarly, Islamic banks also cannot invest in bonds, treasury bills, and commercial papers, or lend to finance inventory or projects for interest.
However, RBI today clarified that what it has allowed "is not Islamic banking" in the strict sense, as the permission is for not for commercial banking but only for an NBFC.
Kerala, a remittance-driven economy, has been requesting the RBI to allow Islamic banking for nearly a decade. It now becomes the first state to start a Sharia-based NBFC.
It has been reported that close to Rs 50,000 crore of interest money is lying unclaimed with Kerala banks, most of which is remittance from Kerala Muslims working in the Gulf and other foreign countries, as under Sharia they cannot claim interest from banks.
"The RBI has permitted KSIDC to float a non-banking finance company and offer products based on Islamic finance principles," the Central bank spokesperson Alpana Killawala told PTI here today.
Outgoing Governor Duvuuri Subbarao, who is retiring on September 4, had earlier said that Islamic banking was not possible in the country.
"Islamic banking is not possible in the country as there are some legal problems," Subbarao had said last November and added that RBI could look at other avenues to help productively channelise the huge NRI funds.
Under the Islamic banking norms, depositors do not get interest on deposits, nor can the banks charge interest to its borrowers. Banks can invest the money, but keep off tabooareas like liquor, tobacco and gambling or speculation.
Similarly, Islamic banks also cannot invest in bonds, treasury bills, and commercial papers, or lend to finance inventory or projects for interest.
However, RBI today clarified that what it has allowed "is not Islamic banking" in the strict sense, as the permission is for not for commercial banking but only for an NBFC.
Kerala, a remittance-driven economy, has been requesting the RBI to allow Islamic banking for nearly a decade. It now becomes the first state to start a Sharia-based NBFC.
It has been reported that close to Rs 50,000 crore of interest money is lying unclaimed with Kerala banks, most of which is remittance from Kerala Muslims working in the Gulf and other foreign countries, as under Sharia they cannot claim interest from banks.
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