New Delhi: The Governor of the RBI (Reserve Bank of India), D Subbarao, has urged the lawmakers in the country, to formulate a seperate set of laws applicable to the Islamic banking system, which is gaining popularity in the world. The governor feels that the interest free banking system, needs a new set of legislations because the current system relies very heavily on interest on both lending and deposits. Subbarao said, "There should be separate legislation for the purpose. The Kerala government had proposed to permit Islamic banking as the inward remittance is the highest here. Reserve Bank is not against the idea, but we can work only under the present legal frame work of the country."
The RBI governor had recently studieed the Kerala state proposal to start the Islamci banking system within the province, but knew well what the fundamental problem with it was. his can be got around through separate channel, so it is not possible under present banking frame work which insists interest for both deposits and lending. Islamic banking is a totally different system which does not permit interest regime.
Apart from the new banking system, the sector's controbution to education was also discussed. Subbrao forced upon the issue of including financial education as a part of school curriculum. A pilot project has already started in Karnataka, but more states need to be promoting the same within their educational syllabus for schools. The good new for higher education seekers however, is that the RBI has issued instructions that banks cannot ask for additional collaterals for educational loans upto Rs 4 lakh.