Concept of Islamic banking in India | Original Article

ABSTRACT:

Islamic banking complies with Islamic law known as Shariah, in which payment and receipt of interest is strictly prohibited and the business is based on the profit sharing. Trading in debts is also not allowed. Islamic banking encourages the financial inclusion by giving interest free loans. Islamic banking is currently growing at the rate of 20 annually and comprises 400 institutions with assets under management in excess of US 1 trillion. Because of the significant requirement of capital in the country, there is wider scope for adoption of Islamic banking in India. Islamic banking will attract FDIs from golf countries, offering sustainable development and ensuring inclusive growth. At 47, credit-deposit ratio among Muslims in India is lower than the national average of 74 (outlook India, 2010). There is a conflicting situation mainly between the Shariah law and Indian Banking Act, 1949. So it is essential to evaluate the regulatory framework, instruments used and future potential of Islamic banking in India. The present study is an attempt to explore the basic knowledge and challenges faced by Islamic banking in India.