The government-owned State Bank of India (SBI) plans to launch a Shariah compliant mutual fund in December according to local reports: following approval from the country’s central bank, the Reserve Bank of India and the government. REBECCA SIMMONDS assesses this step forward for India’s Islamic finance industry.
SBI offers fund management through SBI Mutual Fund, a joint venture between the bank and France-based AMUNDI. The forthcoming Shariah Equity Fund will be offered alongside SBI’s conventional fund offerings. With the launch of the open ended fund, which utilizes the S&P BSE 500 Shariah Index as its benchmark, SBI will become the country’s first state-owned bank to provide an Islamic investment option for India’s Muslim population, which is estimated to be 170 million. A call for Islamic finance options in India has long been made; and the country’s previous governmental administration requested that SBI conduct a feasibility study for the introduction of Islamic banking to India.
India has moved slowly but surely towards the introduction of Shariah compliant options. In 2013 the country’s first Shariah index, the S&P BSE 500 Shariah, was launched by the Bombay Stock Exchange. Earlier this year, India’s resulting experience was utilized by neighboring Bangladesh for the launch of its Shariah index on the Chittagong Stock Exchange, with India Index Services & Products and Taqwaa Advisory and Shariah Investment Solutions developing the index and its underlying Shariah framework.
According to Eurekahedge data, this month two India-domiciled funds, the Taurus Ethical Fund B, managed by Taurus Asset Management, and the Shariah Benchmark Exchange Traded Scheme managed by Benchmark Asset Management Company, are included in the top five funds for annualized returns, reporting returns of 26.49% and 19.96%.
Muslim organizations in India, including the All India Muslim Personal Law Board — the most prominent Muslim body in India — have lent their support to the launch of SBI’s new fund, indicating that they have no opposition to the move as long as Shariah guidance regarding Riba is followed.