THIRUVANANTHAPURAM - The Kerala government will set up an Islamic bank in the state, Finance Minister Thomas Isaac told the assembly Wednesday.

The share capital of the proposed bank has been fixed at Rs.1,000 crore, Isaac said, adding that an advisory committee would be set up shortly to work out the details.

“Non-resident Malayalees and Kerala-based businessmen like E.M. Najeeb are involved in the project,” he said.

Later, Najeeb told IANS the core committee that has been set up has held three meetings following a feasibility study conducted by a consultant.

“The study has found that a bank under the Sharia rules of Islamic banking is feasible and viable here. By next year this would be a reality,” said Najeeb, who is part of the core committee.

“The company would be registered by next month. Once the company is formed, we will move for clearance from the Reserve Bank of India,” he added.

“The bank will not receive or pay interest and have Sharia compliant products. The profits made out of investments will be distributed among shareholders. A Sharia board will decide on what sort of investments will be made.”

Muslims constitute the second largest community in Kerala, accounting for close to 24 percent of the 3.2-crore population.

According to a study done by the Centre for Development Studies, 48 percent of 18.5 lakh non-resident Malayalees are Muslims.

Of the total remittances of Rs.24,525 crore (about $49 million) to the state in 2007, Muslims remitted Rs.12,158 crore (Rs.24.3 million), the study found.