Islamic Banking in India

Topics: Bank, Money, Sharia Pages: 1 (323 words) Published: December 6, 2012
Islamic banking (or participant banking) is banking or banking activity that is consistent with the principles of sharia law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money. RBI has informed that in the current statutory and regulatory framework, it is not legally feasible for banks in India to undertake Islamic banking activities in India or for branches of Indian banks abroad to undertake Islamic banking outside India. The Banking Regulation Act of India does not conform to Islamic banking because it allows banks to borrow from and deposit money with the RBI on interest. But we are in correspondence with the government on how our laws can be restructured or amended so that they are in conformity with Islamic banking laws where there is no question of interest. Money is not a good for trade in the Islamic banking idea. Islamic banks distribute the profit from re-investing the money of the investors in business activities and the like. And so, investors are responsible to share chance of loss also along with profit. But, the chance of loss is not shared with investors in the traditional banking system. Effects of Islamic banking if introduced in India:

* Can give inclusive growth along with control over inflation. * Due to such loans a growth can be witnessed in the agriculture and unorganised sector. * Through equity financing it can help in reduction of the burden of keeping current account and fiscal account deficit under control. * It can reduce terrorism by involving young Muslim youths in financial sector. * They disallow indebt people from taking further loan thus reducing the chances of bankruptcy.; Negative points related to Islamic banking :

* Lack of Standardization
* There are differences in Theory & Practice.
* Loopholes are present in its proper implementation.
* Religious...
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