The Kerala government-promoted Shariah-compliant Al Barakah Financial Services Ltd hopes to start operations from next fiscal, pending RBI licence for non-banking finance company (NBFC).
Al Barakah is also trying to get Security Exchange Board of India (SEBI) approval to float Shariah-compliant private equity and venture capital funds and portfolio management services.
"The RBI has sought a few additional information and we have provided that. With the Kerala high court stay order getting vacated we hope we will soon get approval," T Balakrishnan, former additional chief secretary of Kerala, who is now a nominee of the state government on the board of Al Barakah told Hindustan Times.
Earlier this year, Kerala HC had dismissed petition filed by Janata Party president Subramanian Swami against this initiative.
Kerala State Industrial Development Corporation (KSIDC), a state undertaking, has 11% stake in Al Barakah while the rest is with a few Gulf-based Keralite businessmen. Balakrishnan said the proposed NBFC has an investment commitment of Rs. 1,000 crore.
Adhering to religious guidelines, many in Kerala's muslim community do not take interest on their bank deposits.
"We want to attract them with Shariah-compliant investment products and our borrowers will be mainly entrepreneurs," Balakrishnan said.
The company would start with leasing and hire purchase using own fund before going for deposit taking and money lending.
However, according to Islamic finance expert Zafar Sareshwala, MD, Parsoli Corporation, the scepticism within regulatory authorities will be a challenge for these initiatives. "Some small initiatives were there in the past in Kerala, Mumbai and Lucknow. They did not really take off," he said.