KOCHI: The Kerala State Financial Enterprises (KSFE), the star performer among the public sector undertakings in Kerala, is exploring possibilities of launching Islamic chitties
KSFE, headquartered in the chitti hub of Thrisoor, has proved its business acumen time and again by generating good earnings at a time when several other state PSUs have been accumulating losses year after year. The miscellaneous NBFC (MNBFC) has reported a net profit of Rs262.57 crore for the year 2016-17, compared with Rs153.96 crore the company turned in for the previous year – a 70.54 per cent jump.
KSFE is currently busy structuring the NRI chitti that looks forward to soon raise at least Rs10,000 crore from the non-resident Indians to help fund the Kerala Infrastructure Investment Fund Board (KIIFB) infrastructure projects.
KSFE, the only state-owned chitti company in India, but with many other mandates such as retail lending, money exchange, deposit receiving, etc., has up its sleeves many other plans for the financial industry of Kerala – still in its nascent stage.
The company is currently working on plans to launch Islamic chitti and thus has another feather on its cap. The managing director of KSFE, Purushothaman A, believes that the company can dig deep into the unexplored pools of funds that still remain untapped through Shariah-compliant financial products or ethical products.
Interestingly, this happens at a time when the Reserve Bank of India (RBI) has decided not to allow banks in India to set up Islamic windows. But RBI doesn’t pose a roadblock to KSFE plans as it is not regulated by the apex bank in contrast to the general belief. KSFE may be the only exception in the country whereby it delves into almost all financial activities but is regulated by State’s tax department.
“We have already initiated talks with Shariah experts in Mumbai. They advised us that in order for our chittiess to be Shariah-compliant we need to remove the discount system in chitties – an integral feature of the chitti business,” KSFE chief explained while talking to businessbenchmark.news recently.
Purushothaman said that a lot of work needs to be done on this to ensure Shariah certification for the chitti products. “Shariah system is against interest (riba). The Shariah principles insist that money doesn’t have intrinsic value, but rather has only exchange value and hence discount in chitties stands to violate the Shariah norms,” he added.
So alternatively, KSFE will seek to have chitties without auctions and discounts and the winners will be decided through draws. The only cut from the ‘sala’ amount will be the foreman’s commission of five per cent, which is currently being considered to be revised upwards to seven per cent.
So under the Islamic chitties, there won’t be any difference between the first winner and the last winner in terms of the amount received,” said Purushothaman. KSFE has also plans to launch chitties outside Kerala and this would be easier as the company will soon centralize the chitties through a hub-and-spoke system, centrally operated from the head office.