RBI looks to explore Islamic banking and finance

Islamic Finance is one that corresponds to practising banking and finance under the Sharia regulations.

Sharia does not allow the acceptance of money or interest gained from money provided as loans.

The laws also prohibit investments in firms or businesses that do not comply with Islamic principles, such as provision of pork or alcohol, and the act is touted to be sinful.

One of the world's leading finance behemoth, Ernst & Young, reported that Islamic banking and finance has been witnessing a massive annual growth of 17.6% between 2009-2013.

Forecasts for Islamic banking has been pitched at 19.7% a year by 2018.

It was reported that nearly 1% of the world's total assets were financial institutions that followed Sharia laws.

The Reserve Bank of India proposed measures to adopt interest-free banking that will open Islamic finance in India, tackling banking exclusions pitched under religious reasons.

This proposal was made in the central bank's report last week, as the former RBI Governor departed to give way to his successor, Urjit Patel.

RBI said it would consider launching interest-free financial products after consultations with the government.

The introduction of Islamic finance and banking in India would translate to a whopping 180 million Muslims in the country gaining access to banking.

Muslims consist of the country's second largest religious minority, who were previously prohibited by Sharia laws to get involved in the interest-based banking.

The growth of Islamic finance has been slow in India, due to opposition from political parties.