Morocco's central bank has started talks with a body of Islamic scholars on establishing a central Sharia board to oversee the country's fledgling Islamic finance industry, a central bank official said.

The board, composed of scholars and financial experts, would rule on whether instruments and activities complied with Sharia principles. Its creation would be a step towards establishing full-fledged Islamic banks in Morocco.

The government plans to submit to parliament a bill regulating Islamic banks, which will be called participative banks under the legislation. Parliament's vote is expected by the last week of April, sources said.

"The draft bill does not really meet our expectations, but it's definitely a good start," said scholar Mohammed Karrat.

He noted the bill mentioned only equities, deposits and sukuk (Islamic bonds) as sources of liquidity for participative banks, and did not address interbank money market trading. Future legislation will have to cover that issue, he said.-Reuters