In a major step forward, the Reserve Bank of India (RBI) has rejected the proposal to launch Islamic Banking in India. With this, the hopes of Muslim community have been dashed, who have been looking forward to the day when Islamic Banking would become a reality in the country. One of the key differentiating things about Islamic banking is that interest is not charged on loans, since interest is banned as per Islam. In response to an RTI query, the RBI said that the decision to reject the proposal for Islamic Banking has been taken in the larger interest of the country and its people. The proposal for Islamic banking was reviewed by the RBI and the government and it was rejected on the basis of creating wider and equal opportunities for all citizens of India. If Muslims are allowed interest free loans, they would gain an advantage over other communities, which may lead to protests.
The government has already launched the economic inclusion program with the Jan Dhan Yojana and people from all communities can use this facility to open savings accounts with banks. The Jan Dhan bank accounts provide economically weaker people the opportunity to avail government subsidies and other benefits. It reduces corruption since benefits are directly transferred to the individual’s bank account. The proposal for Islamic banking was first proposed by former RBI governor Raghuram Rajan.