NBFC license revoked
Kochi: Alternative Investments and Credits Limited (AICL), the only non-banking finance company in India operating on Islamic finance principles, informed that the Reserve Bank of India had revoked its NBFC license for not declaring interest on the advances made by it under its participatory scheme. The company was not willing to compromise on Shairah principles by declaring interest and the Board of Directors of the Company decided to discontinue the non-banking finance institution business abiding by the order of the RBI.
The company will pursue legal recourse including appeal to Central government to get the license reinstated, the Chairman Mr. Mohammed Ali A, stated.
AICL was registered as an NBFC in January 2002. The company had declared participatory finance as its business model in the application form and has been operating for the last ten years on participatory finance principles in line with ruling of Islamic Shariah without declaring or charging interest but sharing profit or loss with its participants. The RBI issued a direction in 2006 directing all NBFCs to comply with Fair Practices Code which also included declaration of annualized rate of interest it would charge from clients. However AICL submitted the Fair Practices Code to RBI modifying the same to suit its business model mentioning participatory finance and the RBI did not object to the same then. The company had explained to the RBI further to a show cause notice in 2010 how the participatory finance model was compliant with the Fair Practices Code. However the RBI refused to accept the explanation mentioning that the company did not adopt an interest rate model.
The Company is thankful to its constituents for their support over the last ten years and expects that it will continue to get co-operation in its endeavour to establish its right to provide finance to its constituents without any reference to their religion or region or sex, on principles which it believes to be equitable and just for those who accept finance from the company for carrying out their respective business activities.
We would request all the well wishers of the company to pray for our success.