India’s largest state-owned bank will launch an Islamic equity fund soon aimed mainly at attracting investments from the country’s 170 million Muslims.
The Securities and Exchange Board of India, the country’s capital markets regulator, recently allowed the government-owned State Bank of India and three mutual funds to launch Shariah funds, AP reported.
An official said this past week that the State Bank of India is expecting to attract an initial 1 billion rupees ($16.4 million) to the fund which will launch this coming Monday.
A large section of India’s Muslim population remains outside the banking system, partly because Islamic law known as Shariah prohibits interest.
Shares of companies linked to alcohol, tobacco, gambling and casinos and financial institutions that earn interest would be excluded from the fund.
“It will be a diversified equity fund, including large-cap, midcap and small-cap funds,” said Dinesh Khara, managing director and CEO of the bank’s SBI Mutual Fund.
“We will identify stocks that meet the Bombay Stock Exchange Shariah filter,” Khara said.
India’s stock exchanges have between 600 and 700 companies that are Shariah-compliant.
The new fund has not been opposed by All India Muslim Personal Law Board, an authority that oversees the observance of Muslim civil laws in India.
India is only the second country outside the Islamic world where a state-owned bank is offering a Shariah-compliant fund. The UK issued sovereign Islamic bonds in June.
Global Islamic banking assets were estimated at around $1.8 trillion in 2013.
