Moscow- In a Noteworthy transformation, two of the largest Russian banks, one of which is Sberbank, will soon incorporate Islamic banking rules into their line of work, in a quick response to the invitation sent out by President of Tatarstan, a federal subject of Russia, Rustam Minnikhanov. Minnikhanov’s invitation revolved on how Islam-based banking had been normalized in his republic.
Russian news agency TASS, had reported that two of Russia’s greatest banks are displaying interest towards Minnikhanov’s proposal on a future plan for incorporating a specialized sector for Islam -based banking transactions.
However, Minnikhanov pointed out that should the two banks incorporate the new system of transactions, Russia would be forced to revise a score of fiscal laws and regulations.
In early 2016, a working group on Islamic banking under Russia’s Central Bank approved a ‘roadmap’ for the introduction of this mechanism in Russia. Currently, the group is drawn in in discussions on legislative amendments needed for transactions under Islamic banking rules. According to Poletaev, pilot deals may be executed within the limits of the active legislation.
Russia’s top lender Sberbank plans pilot deals under the rules of Islamic banking in autumn 2016 in the Republic of Tatarstan, TASS reported First Deputy Chairman of the Executive Board Maxim Poletaev as saying.
“We have to make a commitment to executive several pilot transactions in autumn,” Poletaev said.
Islamic banking refers to a system of banking or banking activity that is consistent with the principles of the Sharia (Islamic rulings) and is alternative to traditional banking.
Sharia prohibits acceptance of specific interest or fees for loans of money (known as usury). For this reason Islamic banks raise their incomes directly from profits of business projects they finance. When attracting money from individuals Islamic banks don’t pay income on deposits to their clients except for inflation rate, which is set by the state.
First Deputy Chairman also said that Sberbank will set up an expert group for exploring the potential of the Islamic banking. “We’re planning to seriously delve into this area as it is important for the country for diversification of sources of funding,” he added.