JAKARTA: Indonesia's central bank is revising regulations to allow the country's Islamic banks to trade their Sharia bonds in the secondary market, deputy governor Siti Fadjrijah said yesterday.

Under the current scheme, Sharia banks are only allowed to use sukuk for investment by holding the bonds until their maturity dates, while conventional banks are allowed to trade sukuk in the secondary market.

The revision is part of efforts to boost Islamic markets in the world's most populous Muslim nation and came after the finance ministry launched a five trillion rupiah ($546.1 million) offering of sukuk to the domestic market last week.

"The revisions will allow Sharia banks to use Sharia bonds not only for investment, but also to be traded according to the regulations in the secondary market," Fadjrijah said.

Indonesia has said it also plans to sell dollar-denominated sukuk in November. The government will start a roadshow for the paper in the fourth week of October, sources said.

The proceeds from both rupiah and dollar sukuk issues will be used to help plug the budget deficit.

Sukuk bonds comply with Sharia, or Islamic law, which bans charging interest. Investors are instead paid income derived from assets such as rent from property or commercial transactions such as trade in goods and services.

Indonesia, Southeast Asia's largest economy, still lags neighbours such as Malaysia in developing Islamic products. With Muslims accounting for 85 percent of the population of 226 million people, Indonesia is considered a huge potential market for the Islamic finance industry. ($1 = 9,155 rupiah) (Reporting by Adriana Nina Kusuma, writing by Tyagita Silka, editing by Sugita Katyal)