Srinagar: The High Court has declined to pass directions on introduction of interest-free Islamic banking in J&K citing its refusal by the Government of India despite recommendations by a committee of experts.
Hearing a public interest petition (PIL) by Jammu and Kashmir Peoples Forum, Chief Justice Pankaj Mithal and Justice Javed Iqbal Wani said the matter is a policy decision of the government, and accordingly directed for closure of the PIL.
In late 2008, a committee on Financial Sector Reforms, headed by former Reserve Bank of India (RBI) Governor and economist Dr Raghuram Rajan, had stressed on the need for a closer look at the issue of interest-free banking in the country.
Currently a Professor of Finance at the University of Chicago’s Booth School of Business, Rajan had said certain faiths prohibit the use of financial instruments that pay interest.
The non-availability of interest-free banking products results in some Indians, including those in the economically disadvantaged strata of society, not being able to access banking products and services due to reasons of faith, he had said.
A counter-affidavit filed on behalf of the RBI in the J&K High Court revealed that in 2013, the Ministry of Finance, Government of India, had requested the RBI to give its opinion on introduction of Islamic banking in India.
The government appointed a committee headed by Deepak Mohanty in 2015 to look into the issue.
The Mohanty committee in its report submitted to the RBI in December 2015 made certain recommendations permitting interest-free banking in certain respects. The report was, however, rejected by the Narendra Modi government.
The government in a communication dated 21.03.2017, specifically conveyed its decision that Islamic banking is not feasible and Shariah Banking Window cannot be opened.
Perusing the communication, the division bench of the High Court expressed its incapability to surpass the official decision.
It said “the above decision of the government is a policy decision which is beyond the purview of judicial review, more particularly in a public interest petition. The court cannot enter into the realm of policy decision of the government.”
The bench opined that in case the petitioner is aggrieved by the government decision, it may take appropriate steps to challenge it before the proper forum.
The petitioners wanted a court direction to the Union Finance Ministry, New Delhi, and Reserve Bank of India and the Jammu and Kashmir Bank to issue necessary notification for introduction of Sharia compliant windows as recommended by Deepak Mohanty Committee.
It asked the court to direct the respondent agencies to take immediate steps for opening of Shariah compliant windows to accomplish the object of financial inclusion of hundreds of millions of Muslims of India by permitting opening of Shariah compliant windows in all branches of J&K Bank.
Muslims according to their faith are prohibited from accepting or receiving pre-determined interest on money.
