Islamic banking, which prohibits use of money for vices like gambling and wine as also levy of interest, could provide long term funds to India - which needs over US$400 billion for creating new infrastructure.

Asking the government and regulators to allow Islamic banking, bankers at a two-day conference said financial products without interest payment could be successful as has been demonstrated by the mutual funds industry.

Islamic banking is a US$700-800 billion industry and is growing at 10-15 per cent to stand at US$2-3 trillion in the next decade, Rajya Sabha Deputy Chairman K Rahman Khan told reporters after the conference, summing up views expressed at the event.

The country has been looking at using pension funds and foreign exchange reserves, among others, to finance infrastructure projects. Islamic banking is a participatory banking, he said, clarifying that it does not mean that only Muslims could participate in such a system.

Religious beliefs

Citing an example, he said although Muslim population in UK was not very large, Islamic banking has billions of dollars worth transactions. This system of banking would also provide financial alternatives to Indian Muslims, 70-75 per cent of whom do not deposit money in banks because of religious beliefs, he said.