Frontline
October 10-23, 2009
FINANCIAL SECTOR
Kerala shows the way
THE fact that there is a strong need for interest-free banking and also the means to establish it has been proved in Kerala where the CPI(M)-led government has decided to establish a Shariah-compliant financial institution by March 2010. This was announced by State Finance Minister Isaac Thomas recently. The institution will be started with a share capital of Rs.1,000 crore and the Kerala State Industries Development Corporation will have a share of 11 per cent in it. It will be gradually expanded to a full-fledged banking institution.
State Industries Secretary T. Balakrishnan recently told newspersons in Thiruvananthapuram that the government had commissioned Ernst & Young to give a feasibility report and that the institution would be set up on the basis of the recommendations of the report.
Ernst & Young pointed out in its report that interest money to the tune of Rs.5,000 crore could be lying unclaimed in various banks, as devout Muslims considered it ribaah, or usury, which is prohibited in Islam. Kerala has a high Muslim population, over 27 per cent, and receives over Rs.37,000 crore worth of remittances from the Gulf countries annually.
Purnima S. Tripathi
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