After almost four years of hard work by successive governments in Kerala, the first state-supported Sharia-compliant financial institution, Cheraman Financial Services Ltd (CFSL), has become a reality.
The authorised capital of CFSL has been pegged at Rs.1,000 crore.
The company will not indulge in any interest-based funding nor in activities prohibited under Sharia, including the liquor business, gambling, movies or tobacco.
CFSL has also decided that individual investors cannot exceed nine percent contribution, and the total foreign holding shall not exceed 24 percent.
T. Balakrishnan, one of the directors of CFSL, told IANS the office officially started functioning from Saturday at Kochi.
"All the mandatory licenses from the Reserve Bank of India, Securities and Exchange Board of India and the Wakf Board have been received, and hence the long-awaited financial institution has finally come into being," said Balakrishnan, who recently retired as additional chief secretary of the state.
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CFSL is the apex body; in it are three verticals which include the non-banking financial company, a venture capital company and an infrastructure company.
The share-holding pattern of the company would be 11 percent for the state-owned Kerala State Industrial Development Corporation (KSIDC). The company has 12 directors, of which 10 are private high net worth individuals. Two directors are from the KSIDC.
"The NBFC will be the company that will take care of deposits, received only from high net worth individuals. The minimum amount has been now put at Rs.5 million. We can go public only after we receive the permission for an initial public offering," said Balakrishnan.
He added that the joint venture arm of CFSL would be funding start-up companies.
"We will secure equity in start-ups after assessing their credentials, and based on their profitability. The proceeds from these would be reinvested into the corpus to fund new start ups," Balakrishnan said.
The Kerala government will partner CFSL to promote this new venture by holding road shows in the country and the Middle East.