No steps taken for launching Sharia-compliant mutual funds in India: RBI

New Delhi: No steps have been taken for the introduction of Sharia-compliant mutual funds in India, the Reserve Bank of India (RBI) has said.

Replying to an RTI application filed by a PTI correspondent, the central bank said the Government of India had sought its comments on the launch of Sharia-compliant mutual funds by State Bank of India in December 2014.

The RBI submitted its reply the same month, it said.

The Islamic or Sharia-compliant financial system is based on the principles of not charging an interest on deposits, as it is prohibited under Islam.

"The Reserve Bank of India has not taken any step for introduction of Sharia-compliant mutual funds in India," the reply said.

The RBI was asked to provide details on the introduction of Sharia-compliant mutual funds in the country.

The SBI had in 2014 announced the launch of the same. However, it was deferred to make it a better and more attractive fund in the future, according to an official communication.

H Abdur Raqeeb, General Secretary, Indian Centre for Islamic Finance- an NGO trying to introduce members of the Muslim community to the Sharia-compliant banking system, said the initiation of such special mutual funds for a select group of people would be a much-desired and welcome step.

"It is a misconception that Sharia-compliant mutual funds are beneficial to a particular community. These funds will benefit the economy and ensure financial inclusion of those who avoid such investment for religious reasons," he said.

Raqeeb has been coordinating with various government and regulatory authorities for the introduction of the Sharia- complaint banking system in India.

"When the launch of Sharia mutual fund was announced by SBI, some of the gulf countries were very enthusiastic for investment. It is high time the RBI and the finance ministry instructed SBI to relaunch the same," he said.

SBI had rejected an RTI application seeking details on the relaunch of Sharia-compliant mutual funds, saying the "query is vague and not specific".

The RBI had earlier proposed opening "Islamic window" in conventional banks for the gradual introduction of the Sharia- compliant banking.

On the instructions of the RBI, an Inter-Departmental Group (IDG) has examined legal, technical and regulatory issues for starting interest-free banking in India and has submitted its report to the government.

The RBI had in February last year sent a copy of the IDG report to the Finance Ministry.

A committee on financial sector reforms, headed by former RBI governor Raghuram Rajan, had in late 2008 stressed on the need for a closer look at the issue of interest-free banking in the country.