Thiruvananthapuram, March 3 (IANS) Bowing to stiff opposition from several quarters and a High Court verdict against it, The Kerala government has shelved a plan to start an Islamic bank and instead is launching an interest-free monetary institution.

Industries Minister Elamaram Kareem Wednesday informed the assembly that the state government is starting an interest-free monetary institution.

In a written reply to opposition legislator C.T. Ahmed Ali, Kareem said the new institution would raise funds from individuals, not resident Indians, foreign investors and foreign institutional investors (FIIs).

'The maximum stakes that an individual could accumulate was fixed at nine percent and for FII's it was 24 percent,' Kareem said.

He said a 17-member board had been set up and its first meeting was chaired by prominent Middle East businessman P. Mohammed Ali. Another Middle East businessman C.K. Menon is its vice-chairman.

Included in the board are three top government officials. Of the remaining 14, 12 are from the Muslim community who are top businessmen, either in Kerala or abroad.

Ever since news surfaced last year that the state-owned Kerala State Industrial Development Corporation (KSIDC) is working to set up an Islamic bank in the state, strong opposition to the move came from several quarters.

Former central minister and Janata Party leader Subramaniom Swamy moved the Kerala High Court. A division bench of the court stayed all operations of the proposed Islamic bank.

Last year state Finance Minister Thomas Isaac in response to questions raised in the assembly said that the share capital of the proposed bank had been fixed at Rs.1,000 crore.

The government gave the green signal after a feasibility study was done by a top management company which found that a bank under the Sharia rules of Islamic banking is feasible and viable in the state.

Interestingly, the new monetary institution Kareem says the government will go ahead with is going to be one on the lines of an Islamic bank, but will not have the tag of such a bank.

Muslims in Kerala today is the second largest community with close to 24 percent of the 3.20 crore population.

According to a study done by S. Irudayarajan of the Centre for Development Studies (CDS), 48.20 percent of the 18.48 lakh non-resident Keralites as on 2007 are Muslims.

Likewise, of the total remittances of Rs 24,525 crore received in the state as on 2007, remittances by Muslims accounted for 12,158 crore.