‘To Implement Model In India Govts Discretion’
SRINAGAR Batting for the Islamic Banking model, Governor Reserve Bank of India, D Subbarao Thursday said that its introduction in India depends on the willingness of the political class.
Islamic Banking is an important business model, we dont deny that. I have seen many countries have actively adopted this model. It can be introduced in India as well but the decision has to come from the political sphere. If government legislates it, RBI has to abide by the law and introduce it, Governor of Reserve Bank of India Subbarao told reporters here.
He said that the RBI has received many requests from the people for introducing the Islamic Banking in the country.
We have taken up the model for examination and we have been discussing its possibilities in India. But it is not possible for banks to do business without interest rates. Islamic banking and charging interest is not possible. But we cant rule out scope for this form of banking. It is debatable and it is up to government to introduce it. If government legislate it, we can introduce it.
He said RBI is also trying to introduce plastic currency in the country and save expenses on paper currency.
Printing paper currency is costly and costs us more and it has less life. Therefore, RBI is trying to introduce plastic money. We will introduce it on trial basis and see if it is successful.
He said Reserve Bank had tried to introduce plastic currency 15 years ago but that time people resisted and did not accept it. But now the time has come to introduce it.
He, however, added that RBI would also ensure it is environment friendly by keeping lower carbon footprints in the currency.
According to the governor the Jammu and Kashmir government will enact the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities (SARFAESI) Act in the state very shortly as part of a two-pronged strategy to increase the credit-deposit ratio of the banks operating in the state.
“As far as the SARFESI act is concerned, the chief minister said it is in the final stages of processing and as soon as that is processed, it will be enacted in the assembly or through an ordinance very shortly,” the governor said.
The act, that helps in debt recovery, is not presently in force in Jammu and Kashmir due to the special status of the state under Article 370 of the constitution.
Referring to the proceedings of State Level Bankers Committee meeting here yesterday, Subbarao said the Chief Minister has also assured him that the District Administration including the District Industries Centres in the state will generate credit proposals for increasing the credit-deposit ratio of the banks in the state.
“The Chief Minister had assured us that the administration at district level, particularly the DICs, will be put to action to generate proposals for canvassing with the banks.
“With DICs and District Administration preparing sufficient number of credit proposals and SARFAESI act being enforced, the target of the 40 per cent CDR will be achieved by March 2014,” he said.
The RBI governor said there was a suggestion that this aggregate target of 40 per cent credit-deposit ratio should be spread across banks in all 22 districts of the state and be made into an operational plan.
“I understand that this plan will be submitted to the Reserve Bank within a month’s time, latest by June 15, 2013,” he added.
Subbarao said the Reserve Bank has reiterated that no collateral should be sought by banks from small and medium scale enterprises for loans upto Rs 10 lakh.
“Even for loans above Rs 10 lakh, there is a credit guarantee scheme. The Chief Minister’s grievance was that banks are not extending credit guarantee to SMEs for loans of more than Rs 10 lakh,” he said.
The RBI governor said it has been found that not only in Jammu and Kashmir but across the country, sometimes the borrowers are themselves not inclined to accept the guarantee cover as they feel it could increase cost.
“But regardless, we told the banks that they must encourage borrowers to come under this insurance cover so that the credit flow improves,” Subbarao said.
Subbarao said the Reserve Bank has asked banks in the state to prepare financial inclusion plans for providing banking access to 5400 villages of Jammu and Kashmir with population of less than 2000 people.
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