Hanuman Tripathi, CEO & MD, Infrasoft Technologies said Islamic banking and Islamic investment banking firms are opening up to automate their processes. The regulations under the Sharia banking system are different from those of the developed market banks. Of the 350 Islamic banks, the majority has not taken up end-to-end solutions. There is a huge opportunity in this space.
Islamic banking system does not give a fixed interest rate on deposits and the banks cannot re-invest in the negative list of industries like tobacco, alcohol and gaming, amongst others.
If a special purpose vehicle (SPV) is formed, then the reporting has to be compliant with the Sharia board as well as with the local regulator. Though the number of transactions done by these banks are low, the value of these transactions is high. This makes the software complex and hence, specialised solutions are required to cater to this market, adds Tripathi.
However, IT product firms have not been able to implement their products in the domestic market as the Indian government has not introduced Islamic banking system in India.
The introduction of Islamic banking was recommended by a committee on financial sector reforms, set up by the Planning Commission, for delivery of interest-free finance on a larger scale, even through the banking system. The government has recently decided not to go ahead with the recommendations. The RBI and the regulator are having discussions and if the market in India opens up, it will be opportunity for us, Tripathi added.