Thursday, February 3, 2011

Kerala High Court clears way for India's first Islamic bank

THIRUVANANTHAPURAM: The secular republic of India is all set to have its first Islamic bank.

The Kerala High Court on Thursday dismissed petitions challenging the Kerala government's decision to establish India's first Islamic Bank which will work on the principles of Shariah.

The order came from a Division Bench comprising Chief Justice J Chalameswar and Justice P R Ramachandra Menon, which rejected petitions filed by Janata Party President Subramaniam Swamy and another. The petitioners contended that the state establishing a bank which will work on the principles of a religion will violate the principle of secularism enshrined in the Constitution. However, the court did not agree.

Reacting to the HC verdict, Swamy said he will consider appealing to the Supreme Court after going through the full text. ``I will challenge the same if it was dismissed on merits,'' he said.

The state had first floated the idea of establishing the bank under an entity registered as Al-Baraka Financial Services way back in December 2009. The bank was also to have a body of Islamic scholars to advise whether the principles of shariah were being complied with.

But in January 2010, the HC stayed the government's plans and issued notices to the RBI, Finance Ministry and Kerala State Industries Development Corporation (KSIDC) which was to hold 11 percent equity in Al-Baraka.

The RBI replied that the current laws did not permit such a bank.

With its plans running into rough weather, the state government too lost hope and even told the state assembly that its plan was not to establish an Islamic bank, but only a financial institution that would work on the interest-free principle.

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