Thursday, May 9, 2013

Islamic banking impossible in Indian regulatory set-up: D Subbarao

9 May, 201


RBI governor D Subbarao on Wednesday said implementing Islamic banking model in India would be impossible because it is inconsistent with the banking regulatory set-up where interest is charged and given. However, he said he has suggested the government that the decision being political, it must debate and, if required, bring in a law. \"It can be a parallel system for which a separate regulatory set-up can be created,\" the governor said. \"It is a political issue,\" he said.

During his two-day visit to Kashmir where RBI will hold its board meeting, Subbarao also questioned the wisdom of the West Bengal government to levy sin tax to fund the losses that this section of individual savers (from Saradha), who are excluded from the formal financial system, faced. \"If tax payers have to fund for the losses created by a failed management, it is a political decision,\" said Subbarao.

He also defended the central bank\'s decision to repeatedly hike key policy rates to check the runaway rise in prices. \"It is a fact that in the last three years, we have raised the interest rates 13 times and there has been a lot of criticism that it stifled growth,\" Subbarao told a select gathering of students at the J&K Bank\'s corporate headquarters.
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