August 19, 2013:

The Reserve Bank of India has given the Kerala government its assent to set up a financial institution following the principles of Islamic Finance. The Kerala government shall float a non-banking financial company by the name of Cheraman Financial Services Limited (CFSL) with an authorised capital of Rs. 1000 crores. CFSL shall be Shariah compliant and shall not charge interest on loans given. CFSL shall also not float an alternate investment fund with a corpus of Rs. 250 crores for financing start-ups.

CFSL has already received clearances from RBI, SEBI and the Wakf Board. CFSL is the latest incarnation of Al Barakah Financial Services. The state has several Gulf links and intends to tap funds from through the population there.

The proposal to introduce Islamic finance with conventional means of finance was done in 2008 by the Committee on Financial Sector Reform (CFSR). Thereafter there have been spurts of activity in the Islamic finance space; however, after introduction of the Shariah Index in Bombay Stock Exchange, it is the next important and landmark attempt to consider Islamic finance in India.

Post the global meltdown of 2007, several countries have been considering alternate mode of financing; several countries have made regulatory amendments to accommodate Islamic finance into mainstream finance. India seemingly is following the rest of the world to evaluate this alternate mode of financing.

 


 

[Reported by: CS Nidhi Bothra]