India’s first Islamic Bank is going to function in Kochi, Kerala by the next year with active involvement of the state government. The bank’s registration formalities are being fulfilled on a war footing. Kerala Industries Department Corporation (KSIDC), which is the designated agency for the formation of the bank, actively involved in the new initiative and a high level meeting held at Kozhikode on August 12 approved a project report prepared by Ernst & Young. KSIDC will have 11 per cent stake in the proposed banking company. Government officials said it will be registered as a non-banking finance company (NBFC) in the beginning and later get transformed into a full-fledged Shari’ah-compliant bank. The project proposes to raise an initial capital of Rs 500 crore from leading non-resident Indians (NRIs) and Indian business houses and it is said that leading NRI businessmen such as Mohammed Ali, MA Yusuf Ali, CK Menon and other Kerala-based industrialists such as Azad Mooppan have shown keen interest in the venture. Purely based on Shari’ah principles, the bank will avoid interest-based business activities. The bank plans to invest funds in infrastructure projects, and two areas, Bai al Salam and Instisna, under Shari’ah have been identified for such investments. The bank will invest all its funds in wealth generating investment avenues and will distribute profit to its shareholders. This concept is very popular in West Asia and in predominantly Muslim nations such as Malaysia and Indonesia. Leading international banks such as HSBC and Standard & Charted have exclusive Islamic banking windows.