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Posts Tagged ‘Raghuram Rajan Report

Interest Free Banking Key to Growth in India, Says Rajan

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Points of Essence:

  • Raghuram Rajan, who was responsible for the financial sector reform report which recommended Islamic banking to the Indian Government, is now an economic adviser to the Indian PM, Manmophan Singh. In that famous report, he suggested that Islamic banking be introduced on a larger scale in India being identified as key to  an economic growth in India. It is also a means to reach out to the bankable society in India who have stayed away from the mainstream banking due to their faith restrictions on interest charges.

The International Monetary Fund’s former Chief Economist Raghuram Rajan has just been appointed as 
economic adviser to Indian prime minister Manmohan Singh.

Just before taking up this responsibility, Rajan was given the job to lead a high-profile committee on financial sector reforms, including the one on Islamic banking and finance.

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Written by Suapi Shaffaii

November 10, 2008 at 10:42 am

Raghuram Rajan Committee recommends Interest-free banking

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Points of Essence:

  • The author submitted that the term of ‘interest-free banking’ instead of ‘Islamic banking’ was aptly used in the Raghuram Report put to avoid any communal uproar before coming election.
  • The Raguran report argued that it was within the ambit of financial infrastructure for inclusion to provide for interest-free banking as certain faiths prohibit the use of  financial instruments that pay interest. Hence, no access banking products and services. Also, the delivery of interest-free finance on a larger scale, including through the banking system need to be allowed to be in consonance with the objectives of inclusion and growth through innovation.
  • Being mentioned the first time in any government report, it is a challenge to convince India that interest free banking is genuinely to boost faster and inclusive growth for Indian economy and this goes beyond politics and religious aspects of Islamic banking.

By Syed Zahid Ahmad

Though Raghuram Rajan Committee was silent about Islamic Banking in its draft report released on 7th April 2008, it has suggested Interest-free banking as a part of recommendations made for financial sector reforms. The term of ‘interest-free banking’ instead of ‘Islamic banking’ is needed to avoid any communal uproar before coming election. The next two paragraphs on interest-free banking have been inserted in final report as submitted to the Prime Minister on 12th September 2008.

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Written by Suapi Shaffaii

September 22, 2008 at 3:18 am

Raghuram Rajan report advocates introduction of Islamic banking in India

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Points of Essence:

  • Raghuram Rajan Report, if accepted by the Indian Government, will mark the entry of Islamic banking in India. Currently, Islamic banking is not allowed in India. Hailed as a blueprint for a reform of the Indian financial sector, the report had identified among others, Islamic banking as a key sector to bring about a change in the Indian financial architecture.
  • The report referred to Islamic banking as like equity financing in place of charging interest on lending, which is a key principle of Islamic banking.
  • The report recognised the financial exclusion of Muslim communities and thus recommended that micro-equity financing to be included in mainstream banking products. This is to encourage participation of all communities in India including Muslims in the country’s economic growth.
  • The report which was based on three principles: inclusion, growth and stability would be presented to the Indian Government soon.

By Kumud Das

The high-profile committee on financial sector reforms, headed by International Monetary Fund former chief economist Raghuram Rajan, is likely to submit its final report to Prime Minister Manmohan Singh, who is also chairman of the Planning Commission, by the middle of the month.

The committee, which was set up by the Planning Commission to recommend various ways to take the country’s financial sector reforms forward, has included a few points pertaining to Islamic banking. The final report has two pages referring to themes like equity financing in place of charging interest on lending-a key principle of Islamic banking-which is yet to be allowed by the government.

Speaking to FE from Hyderabad, Vijay Mahajan, chairman of Hyderabad-based micro finance organisation Basix and one of the members of the committee, said “While interacting with representatives of the Muslim community in Mumbai, we thought it proper to add these issues to ensure that the community also becomes part of financial inclusion in the country.”

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Written by Suapi Shaffaii

September 4, 2008 at 4:18 pm