Recent reports indicate that the Indian banking market is keen to tap into the macro financing opportunities provided by the Islamic banking sector. As a result, the Indian government is currently considering introducing Islamic banking as a means to obtain further financing for its minorities and is looking at the equity-based sector as a possible remedy for the damages caused by the current global economic crisis.

Islamic banking, which is equity-based instead of interest-based, has a series of specific financial instruments such as the Sukuk, a financial certificate which can be regarded as an Islamic equivalent of a bond. Sukuk can be used to transform an asset’s future cash flow into present cash flow by being issued on existing assets or assets which may become available at a specific date in the future.

The Indian government has thus appointed a special committee from the Reserve Bank of India (RBI) to study the functioning of the various instruments involved in Islamic finance and banking. The latter is seen as a means to access a large amount of financial capital which Muslims in India are currently unable to invest due the strict Islamic banking and investment principles which prohibit the charging, or paying of interest.

Moreover, the Muslim community in India is currently seen as the country’s most heavily disadvantaged at a financial level, with a rate of financial exclusion reaching 80 percent.