Islamic Bank Gets Clearance from Kerala HC

Legal News India: The Kerala High Court dismissed all appeals challenging its decision to set up an Islamic Bank in India. The Islamic bank, the first in the country, will operate on Shariah principles.

The order to establish this bank came from a bench consisting of Chief Justice J Chalameswar and Justice P R Ramachandra Menon. The judges rejected petitions by Janata Party President Subramaniam Swamy and a few others. The petitioners contended that if a state establishes a bank catering to a particular religion, it will be infringing the principles of secularism written in the Indian Constitution. The court rejected this claim.

The state of Kerala had floated the idea of setting up an Islamic bank under the name of Al-Baraka Financial Services back in December 2009. However, in January 2010, the high court stayed the state government’s plans and dispatched notices to the Reserve Bank of India (RBI) and the Finance Ministry and Kerala State Industries Development Corporation (KSIDC). The RBI replied to the notice saying that the laws did not authorize the establishment of such a banking institution.