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India's first Sharia-compliant NBFC eyeing investments from sultanate

Published: 29/10/2013 05:26:44 PM GMT
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The capital would be used to fund various infrastructure development projects across India, according to chairman of the company. Th (more)

The capital would be used to fund various infrastructure development projects across India, according to chairman of the company.

The company, with an authorised capital of R10bn (RO62.6mn), is registered with the Reserve Bank of India (RBI) as a non-deposit taking NBFC. The Kerala state government's investment-promotion agency - Kerala State Industrial Development Corporation (KSIDC) - holds an 11 per cent stake in CFSL.

"This is the first RBI approved Sharia-compliant NBFC. We bagged the licence in July, 2013 and we are allowed to operate equity finance and leasing products," said Dr P Mohammed Ali, managing director of Galfar Engineering & Contracting and chairman of CFSL.

CFSL plans to attract investments of up to US$1mn from the non-resident Indians (NRI), the various sovereign funds of the Middle East, banks, institutional investors and Arab family businesses.

The company intends to focus upon infrastructure development, especially under the 'wakf' land development scheme, across the country.

"We will mobilise finance by way of share capital as deposits are not allowed. We will provide equity finance to major infrastructure projects on 'wakf' land, initiated by the state and central governments. Major commercial projects in the private sector that require equity financing will also be considered. The leasing will be primarily focused on the construction-equipment and medical-equipment sectors," said A P M Mohammed Hanish, managing director of the company.

The company had run into trouble in 2011, when former union minister Subramanian Swamy had legally challenged KSIDC's participation in the company. Swamy had raised issues pertaining to the state's involvement in Islamic banking in a secular country.

"After our launch in 2009 and withstanding legal obstacles in 2010 and 2011, the RBI, after months of discussions and clarifications, finally issued CFSL the licence for a non-deposit taking NBFC in July 2013. Dividend and capital gain are our sources of income. At the same time, the two products that have been allowed by the RBI could attract a great deal of participation from sections interested in Sharia-compliant investments," added Hanish.

The company had already held extensive discussions in UAE and is looking forward to tapping investments from the rest of the GCC countries.

Hanish added that two years on, after assessing the performance of the NBFC, the matter relating to accepting deposits would be considered by the central bank.

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