It is illegal to set up a Sharia compliant Islamic bank in India.

February 4, 2011.

Statement of Dr. Subramanian Swamy,

President of the Janata Party.

The judgment of the First Bench of the Kerala High Court on my Writ Petition opposing the setting up of an Islamic financial institution in the State of Kerala is a googly that appears to have clean bowled the media.

In the judgment it is stated that there is nothing wrong with an Islamic financial institution provided it is within the laws of the country. This was in fact my contention too. The Banking Regulations Act and the Reserve Bank of India Act specifically bars the setting up of a Sharia compliant Islamic banking or non-banking institution. This is also confirmed by the affidavit filed, both by the Ministry of Finance and the Reserve Bank of India, in reply to my Writ Petition. The Reserve Bank in fact disclosed that they had cancelled licences of several institutions which had not disclosed that they were practicing Sharia law in the financial transactions of their institution. The High Court thus held my Petition as unnecessary and dismissed it.

The High Court has held that it is not unconstitutional for the Government to partake any business activity through religion based institutions provided they are within the existing laws of the country. Hence, the media headlines that the Kerala High Court had given clearance to setting up of Sharia compliant Islamic financial institution is wrong. No such clearance has been given.

The only way a Sharia compliant Islamic financial institution can be set up in India is if the Parliament amends the existing laws, namely, Banking Regulations Act and the Reserve Bank of India Act. This must be opposed tooth and nail by the Opposition as anti secular. As of now, it is illegal to set up a Sharia compliant Islamic Bank in India.

( SUBRAMANIAN SWAMY )

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