1st Islamic banking firms to be born by Christmas, may walk by Easter

Even as the Reserve Bank of India (RBI) is yet to give a formal nod, the country’s first heavy-duty Islamic banking financial institution may hum a tune on global business before the next Easter. The Non-Banking Financial Companies (NBFC) is proposed to be set up in Kochi before Christmas.

The Kerala government and the NBFC’s NRI promoters are waiting for Union finance minister Pranab Mukherjee nod as he is expected to make the crucial decision on the NBFC’s operational dimensions this week.

Ernst & Young, signed up by the Kerala government as consultant for the project, had come out with a project report on the Islamic banking NBFC, proposing Rs 1,000 crore authorised capital. A meeting of the core group of promoters held in Sharjah last week has okayed a pattern of 11% stakes for KSIDC (State government’s investment promotion arm) within the 51% equity earmarked for promoters. About 49% is to be culled from public through private placement. Besides KSIDC, this unique venture has 19 NRIs in its club of promoters.

Sources told FE the Sharjah meet of the board of promoters was in consensus to incorporate the Kochi-headquartered company before the Christmas this year. It may also go live with its Islamic banking operations by Easter, provided there is policy hand-holding from the central government.

By April 2010, the NBFC counts on emerging India’s first firm to deal solely in Sharjah-compliant products. For starters, the company will take shape with an initial paid-up capital of Rs 100 crore.

For Kerala, with its warchest of 1.8 million NRIs logging over Rs 30,000-crore in deposits in Kerala banks, raising capital for the venture is no tough odyssey. On the sunny side, NRI businessmen with deep pockets like MA Yusuf Ali (retail giant Emke Group), P Mohammed Ali (Oman-based Gulfar Group), Azad Moopen (Hospital industry major Moopan Group) and CK Menon (Doha-based Behzad Group) have already hopped on the Islamic banking bandwagon.

However, if the company— proposed under the name of Al Barakah Financial Services— is to be developed as global Islamic banking firm, it may need amendment of RBI banking regulations. Initially RBI was not too keen on the concept, but there is fresh perspective this season after Raghuram Rajan Committee recommendations on financial sector reforms. The panel clearly advocates permitting “delivery of interest-free finance on a larger scale, including through the banking system”.

Link: http://www.financialexpress.com/news/1st-Islamic-banking--firms-to-be-born-by-Christmas--may-walk-by-Easter/545260/