KUALA LUMPUR: Indian Prime Minister Manmohan Singh said Wednesday that he would ask the Reserve Bank of India to look into Islamic banking practices in Malaysia, amid pressure on the India's central bank to introduce such an interest-free system.
"There have been from time to time demands for experimenting (with) Islamic banking. I would certainly recommend to RBI, which is looking into the question, to look at what is happening in Malaysia in this regard," said Singh, when asked whether India would like to learn something about Islamic banking from Malaysia.
Singh, who is on an official visit here, earlier held wide-ranging talks on economic and strategic issues with his Malaysian counterpart Najib Razak. The two leaders signed six pacts in various fields like science and technology, IT and health.
Singh invited Malaysian companies, which have good records in infrastructure, to invest in the sector in India, pointing out that funds to the tune of $1 trillion would be required over the next seven years and rules were being relaxed to enable smoother FDI flows.
Singh's statement on the possible introduction of Islamic banking in India comes amid growing pressure on the country's central bank to introduce the system in order to attract billions of dollars in investments from Gulf and Middle Eastern countries.
Islamic finance is currently estimated at $1 trillion and managed by about 400-500 Islamic banks worldwide. By 2020, this figure is expected to touch $4 trillion. According to projections by global consultant McKenzie, investment surplus in the West Asian region is expected to be around $9 trillion by 2020. Currently, the investment surplus is around $1.5 trillion.
Recently, Muddassir Siddqui, partner and head of Islamic Finance, Middle East, SNR Denton and Company, urged the Indian government to open interest free banking on a pilot basis.
"We held close interactions with the Finance Ministry and RBI officials. We hope the ice is breaking. There was no time frame for setting up Islamic banking. We are hopeful permission would be granted very soon," Siddqui had said.
Relations between India and Malaysia are set to receive new impetus with the two countries signing a broad-based trade-opening agreement and deciding to forge closer cooperation in a range of other areas, including defense and hydrocarbons.
"The year 2010 is a turning point in the history of India-Malaysian relations. The understandings and agreements that we reached today have established a solid foundation for the building of a strategic partnership and bringing our two peoples together for a better future," Singh told reporters after talks with Najib.
The Malaysian premier said his country would be happy to share India's economic success and join its journey for the country's development. "We must give new impetus to this relationship. I indicated to Prime Minister Singh that Malaysia is ready for a deeper and more intensive relationship," he said.
The two leaders formally announced conclusion of negotiations on the Comprehensive Economic Cooperation Agreement (CECA), aimed at enabling freer movement of goods, services and investments. Najib said the two countries have set a trade target of $15 billion by 2015 and hoped the CECA would help achieve it.
© Arab News 2010
