Khan told media here this afternoon that Sharia-compliant banks should work as an alternate banking system, similar to what existed in the UK, Russia and the U.S.
"Mutual funds and venture capital funds are in tune with Islamic laws," Khan added.
He said that he had handed over a memorandum in this regard to the Prime Minister, and added that a committee headed by the Cabinet Secretary K. M. Chandrasekhar has been asked to submit a report on the issue to the Prime Minister.
Reserve Bank of India (RBI) regulations are said to be the biggest hurdle in the setting up of Islamic banks.
Money earned in the form of Interest is considered non-Islamic, and according to Sharia laws, investment in the wine and pork industries is prohibited.
Khan said that a Sharia-compliant system would instill social justice even in economic activity in which profit and loss will be shared.
He said that the Muslim population constitutes 15 percent of India's total population of over a billion, and they were not investing in savings accounts because it generates interest which is non-Islamic. He said that if Sharia-compliant banking is introduced, this segment of society would come into the saving net.
Khan also said Sharia-compliant banking could increase the flow of investments from the Arab world.
He also briefed reporters about next month's Indo-Arab Economic Summit in Delhi. By Naveen Kapoor (ANI)