[Akshata Kumta and Shaalini Agarwal, students of Gujarat National Law University, Gandhinagar, write about how Islamic banking could be a potential solution to deal with the problem of exclusion of minorities from accessing to the banking and finance sector.]


After many years of extensive debates, reports and declarations, the RBI in November of 2017 declared that it would not allow for the incorporation of Islamic banking in India. It based its decision on the ground that there were sufficient pre-existing schemes in place for financial inclusion of all sections of society, including the Muslims. Research indicates that certain pre-existing schemes for financial inclusion were not as effective as the Government portrayed them to be. This puts the Indian demographic, especially minorities, at severe risk of exclusion from conventional banking methods. Therefore, Islamic banking could be a potential solution to deal with this problem of exclusion of minorities. This paper seeks to analyze whether this decision of the RBI was truly right and beneficial for the wide Indian demographic. This paper also seeks to answer the following questions, in corollary to the main premise: would such a non-conventional form of banking be constitutionally valid? If it were to be introduced in India, then who would administrate it? What would the short term and long term challenges be, if it were in fact introduced in India? Furthermore, how must it be implemented to effectively deal with all these challenges?