January 5th, 2010
A division bench of the Kerala High Court Tuesday stayed all further move by the state-owned Kerala State Industrial Development Corp (KSIDC) to set up an Islamic bank.
The division bench gave its orders after a petition was filed by former central minister Subramanian Swamy, who maintained that the proposed bank was against India’s secular credentials and its banking norms.
The court accepted the petition and asked notices to be issued to the central government and KSIDC.
Last year, in response to questions raised in the assembly, state Finance Minister Thomas Isaac had said the share capital of the proposed bank had been fixed at Rs.1,000 crore.
The government gave the green signal to the project after a feasibility study found that an Islamic bank was a viable proposition in Kerala, following which a company was registered to take the process forward.
Soon after the court ruling Tuesday, a company director told IANS on conditions of anonymity that the ruling would be challenged.
“Now that the company has been formed, we will also see that we fight the case,” he said.
As per the proposal, the bank will not pay any interest to customers, while a Sharia board would decide what sort of investments it would make.
The proposed bank would have Sharia-compliant banking products and profits made out of the investments would be distributed to the shareholders.
Muslims comprise the second largest community in Kerala, accounting for close to 24 percent of the state’s 3.2-crore population.
Of the total remittances of Rs.24,525 crore received by the state till 2007, that by Muslims stood at Rs.12,158 crore.