Islamic banking not feasible, Kerala HC told

via published on September 10, 2010

KOCHI: The government on Thursday told the Kerala High Court that it is not legally feasible for banks in India or its branches abroad to undertake Islamic banking activities.

It said this had been the government’s stand even while giving replies to questions in Parliament as also in response to various VIP correspondence on the subject.

The government’s position was stated in a counter affidavit filed by M M Dawla, Under Secretary in the Finance Ministry, in response to a petition by R V Babu of Hindu Aikya Vedi against any proposal to form Islamic banks.

Earlier, Janata Party leader Subramaniam Swamy had also filed a PIL against establishment of the financial institution to be run on the model of Islamic banks with the support of Kerala State Industrial Development Corporation (KSIDC).

The government stand is that non-banking financial companies should basically commence or carry on activities in accordance with RBI rules and directions issued thereunder.

The government said though the relief sought for by the petitioner was not directly connected with the Union of India, the affidavit is filed for the purpose of clarifying the Centre’s stand on the issues involved.

In April, the high court had directed the state government and its institutions not to participate financially or otherwise in the financial company modelled on the lines of Islamic bank.

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