The Reserve Bank of India (RBI) has allowed Kerala government to launch a non-banking finance company (NBFC) based on the principles of Islamic finance.
The new institution will be a joint venture between the Al Barakah Financial Services Ltd and the Kerala State Industrial Development Corp (KSIDC).
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Kerala State Industrial Development Corporation will float this NBFC called Cheraman Financial Services Limited (CFSL) with an authorised capital of INR10 billion.
Kerala Industries Minister Elamaram Kareem said the licence was granted due to the great interest by Gulf nations to invest in Indian infrastructure projects.
CFSL has already received clearances from the RBI, SEBI and the wakf board, the chairman P Mohamad Ali said.
The Shariah-compliant CFSL will not charge interest on loans or give interests on deposits. The entity will target sectors like infrastructure, services and manufacturing sectors while resisting investing in businesses that provide goods or services considered contrary to Islamic principles.
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By GlobalDataThe KSIDC will hold 11% shares in the company whereas the other shareholders can hold a maximum of 9% shares.
Counting on the state’s traditional Gulf links, the previous government had hoped to raise INR40 billion.
CFSL will have a paid-up capital of about INR1 billion but intends to raise about INR2.5 billion as alternative investment fund.
