A Sharia-compliant international bank's plan to launch its business in India is facing opposition from Hindu groups that say an Islamic bank should not be allowed to operate in a secular country.

The Islamic Corporation for Development (ICD), a subsidiary of the Saudi Arabia-based Islamic Development Bank (IDB), is expected to set up its first Indian branch in Gujarat city of Ahmedabad.

The ICD branch would operate as a non-banking financial company (NBFC), providing loans to small and medium businesses and sharing their profits and losses, instead of charging interest — which is the basis of the Sharia-compliant banking.

The exact date of the branch's launch in Ahmedabad has not been announced.

Encourage religious conversion?

Although some Muslim experts believe the financial service offered by the ICD can benefit people belonging to certain underprivileged sections in India, leaders of Vishva Hindu Parishad (VHP), India's largest Hindu religious organization, said the Sharia-based financial institution should not be allowed entry into India because it operates against the country's principles of secularism.

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"They are planning to launch ICD to introduce a Sharia-based financial system in India. By establishing it, they are aiming to implement Sharia law and promote Islam in the country," Surendra Jain, joint general secretary of VHP, told VOA. "Banking activity in India is a totally secular activity. It cannot be controlled by any religious way or any religious system."

He added, "If as a Hindu I seek a loan from this company, my application will be rejected. They will say, if you convert to Islam, I shall give you an interest-free loan.' The establishment of this financial company in India will encourage religious conversions in the country," he said.

But Zafar Sareshwala, who heads the ICD's India operations, said those who are opposing the entry of the NBFC in India have no idea how it is set to operate in India.

"Those who are opposing don't know what it is. This is not going to be the distribution of zakat [where only Muslims are the beneficiaries]. It will be a profit-making enterprise. Whoever stands the scrutiny of the lending norms will get the loans," Sareshwala told VOA. "Across the world, most of the recipients of Islamic finance are non-Muslim."

IDB, which is an international investment organization, was established to provide funds for infrastructure projects in the Islamic world, as well as economic and social development programs. Following Sharia law, the IDB supports developments in 56 Islamic member countries.

Indian opponents of the ICD appear to be fighting an uphill battle in their campaign against the financial institution.

More branches planned

When Indian Prime Minister Narendra Modi visited Saudi Arabia in April, an extensive agreement was signed between his delegation and IDB to facilitate the bank's launch in India.

Since the agreement, ICD, an affiliate of the IDB, has been in the process of setting up its first Indian branch in Ahmedabad, with plans to open more branches across the country.

Under the agreement, India's state-run Exim Bank would provide a $100 million line of credit to help Indian exporters do business with IDB's member countries. IDB has promised to donate $55 million to India to set up some 350 mobile medical units for rural regions.

H. Abdur Raqeeb, general secretary of the Indian Center for Islamic Finance, a New Delhi-based non-profit group that promotes Sharia-based banking in India, said Sharia-compliant banking will significantly contribute to development in India.

"The IDB and ICD sponsored NBFC in India will be operating on participatory and ethical principles based on profit and loss sharing, without charging interest. The enterprises often operate in risky markets and are sensitive to changes in economic environments. Therefore, there is a need of an alternative system of financing, instead of the conventional one based on interest," Raqeeb told VOA.

"The NBFC is going to be warmly welcomed by the religious minorities and marginalized segment of India," he said.