State Bank of India launches Shariah-compliant mutual fund

India’s largest public sector bank, State Bank of India, has launched its first Shariah-compliant mutual fund tapping into the $1.5 trillion business worldwide.
The SBI Shariah Equity Fund will be open for the public to subscribe on Monday, Dec. 1, offering medium to long term capital gains equity and equity related instruments a longtime demand of ethical investors.
The issue closes on Dec. 15 and reopens on or before Dec. 26.
The minimum application amount is Rs 5,000 and in multiples of Re 1 thereafter with additional purchase of Rs 1,000 and in multiples of Re 1.
Repurchase is offered at Rs 1000 or 100 units, or account balance whichever is lower.
The scheme will be benchmarked against the Standard and Poor’s BSE (Bombay Stock Exchange) 500 Shariah Index that that avoids exposure to business activities related to pork, alcohol, gambling, financials, pornography, tobacco and speculative trading, which are considered sinful.
The Shariah index was formed using the guidelines of an advisory board.
The decision of India’s central bank, Reserve Bank of India, to allow Shariah-compliant funds was widely seen as a major step toward ensuring financial inclusion of the country’s largest minority constituting roughly 15 percent of its population.
The SBI also offers systematic investment program (SIP) under which investment can be made monthly in a fixed amount for a minimum period of six months with a minimum of Rs 1000 and in multiples of Rs 1 thereafter or minimum Rs.500 for minimum one year to overcome short-term market fluctuations.
Non-Resident Indians (NRIs) can invest on a repatriable basis by remitting funds from abroad through normal banking channels or by submitting payments made by demand drafts purchased from FCNR accounts or by cheques drawn on NRE accounts or through Special Non-resident Rupee Accounts maintained with banks authorized to deal in foreign exchange in India.
The NRI applicants should instruct the bank branch to send the necessary FIRCs in original on security paper to the registrars as soon as possible to enable early processing of their applications.
The NRIs can also apply on a non-repatriable basis from their NRO account.