In a previous article, the concept of Islamic Banking was explained briefly, to give an idea to people on how they could be fooled in the name of faith to invest their money into a non-authorised banking system.  Lately, news about Heera group based in Hyderabad, and Neelanchal Technocrats Pvt. Ltd., a Bengaluru-based company have been doing the rounds.  The ED has been investigating a money laundering case against the Heera Group and Nowhera Shaik for cheating gullible people and collecting thousands of crores of rupees from them on the false promise of abnormally high returns of around 36 per cent per annum. So far, properties attached are worth 400 crore plus and there are plenty more to come.  A fraud of this scale run by peers within the community who are most revered and trusted by the gullible commoners is grossly under reported in main stream media. Moreover, there seem to be no attempts at making people aware of the menace of parallel banking which is considered Riba (interest) free for this community. The money was given to these fraudsters on a promise of a 36% return per annum, and was carried out in a most organised manner, where people were going to low-key offices and establishments similar to banks, and investing their money with non-government sources. A combination of greed and blind faith proved to be fatal for these people, as they stood to lose all of their life savings to this scam.  Here is another look at how this con works, and why it should never become legalised in any form, in India.

Islamic Banking is a large scale reality among Muslims everywhere in the world. It is not followed and observed by many due to lack availability of this feature in the countries where they live, or due to having more familiarity with the bank where they already hold accounts. The Muslims of India have been pushing to slide it in quietly into the Indian system for decades, but so far it has not been introduced here.  In 2017, RBI gave an outright statement that it is not going to pursue this despite there being a great push by Raghuram Ranjan over years. In 2008, he presided over a Financial Sector Reforms Committee, which stressed that India should look at the possibilities of interest-free banking as “Certain faiths prohibit the use of financial instruments that pay interest”.
This last part by the way is a myth.  No banking system in the world survives without some form of interest.  Sharia is just attempting to bring its own authorized system in place to make its presence felt more in every sphere of life.

The supporters of Islamic Banking in India hold the opinion that due to a  lack of Sharia-compliant Halal banking options, many Muslims refrain from using conventional banking facilities and resort to nonconventional methods, risking their investments with non-certified ‘bankers’ within their community.  They even argue that it is because of the lack of a fomalised Islamic banking system, that cons like these are able to loot people.  However, what they fail to reveal is, that none of the Islamic banks enter into any partnership agreement with central banks, and this in effect means that the con becomes more formalised, with an approval stamp by the government. The main reason given for opposing conventional banking is verse 2:168, which states:

“O mankind, eat from whatever is on earth [that is] lawful and good and do not follow the footsteps of Satan. Indeed, he is to you a clear enemy”.

Despite best efforts after reading this verse, there still remains mass confusion and a lack of clarity, on how exactly the Islamic Banking system works.  Many people were unclear on what is the difference between Islamic and ordinary banking, and what makes it Halal. I will share my understanding of this

You go to an ordinary bank. You borrow 1 lac rupees for a business. Perhaps the bank will charge you interest of 16000 per annum on this loan. This is Riba/Sood and is considered Haram in Islam.

Now you go to an Islamic bank. For the purpose of understanding, we can quote actual amounts charged in countries where Islamic Banking is in practice, converted into INR.  The bank will make itself a partner in your business, and decide what would be its share.  Please take note, share of the bank as a partner will be decided by the bank itself, and not you as a business owner. The amount of this share will not be fixed up front, and it could range between 18000 to 25000.

Taking a look at car leasing, most of us are aware of this procedure.  When you secure a car loan from an ordinary bank, lease it through them, the bank will buy a car worth, let us say, 20 lac, and you become its owner. You pay an amount as interest, insurance etc every month to the bank. This amount would be 43000 per month and this will be called Riba / Sood. After the lease period is over, you become the owner of the car but this is Haram.

Now if you go to an Islamic bank, the bank buys the car, becomes its owner and rents it out to you. You pay an amount of 46000 according to calculation based on how it is charged in neighbouring countries, as rent to the bank. This amount includes the ‘rent’, the ‘kafala’ or Takaful (Islamic Insurance). After the lease period of 5 years is finished, you either return the car to the bank, or ‘buy’ it from the bank after paying an additional pre-decided amount, which could range between 5% to 50% of the price of the car. This is Halal.

Any person with some sense can figure out that at best, this system of banking is another ploy by the Shrewd financiers to engage more and more people in to the organized banking system. The enlightened skeptical on the other hand are fully aware that this is nothing more than another form of economic Jihad.

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