Islamic banking not possible in India: RBI Governor D Subbarao

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New Delhi: The Governor of Reserve Bank of India (RBI) D Subbarao has said that Islamic banking is not possible in the country due to legal problems. Talking to reporters in Kochi on Thursday, RBI Governor said that Kerala is the only state in India that has been considering the possibility of Islamic banking in the country. “It is possible that other states may have approached RBI, but Kerala has been rather actively pursuing it.”

Subbarao said we have sent a written statement to the government of India regarding what necessary amendments are needed in the current laws.

“There should be some channel of that money into Kerala and Islamic finance was the model suggested by the state government. We appreciate the objective behind that interest, but there are some legal problems in the RBI allowing Islamic banking, which has a prohibition against charging interest rates,” Subbarao clarified.

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