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    INDIANISTITUTE OF PLANNINGAND MANAGEMENT

    2011

    ISLAMIC BANKINGININDIA

    BIG OPPORTUNITY

    AJITKUMAR & SURYADEEP SINGH RATHEE

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    OM NAMAH SHIVAY

    INDEX

    S.NO PARTICULARS PAGENO.

    1. INTRODUCTION 3.

    2. WHAT IS ISLAMIC BANKING 4.

    3. ORIGIN OF ISLAMIC BANKING 5.

    4. COUNTRIES USING ISLAMIC BANKING 10.

    5. SHARIAH PRINCIPLES IN ISLAMIC BANKING 12.

    6. PRINCIPLES OF ISLAMIC BANKING 13.

    7. TERMINOLOGIES USED IN ISLAMIC BANKS 13.

    8. ISLAMIC DEVELOPMENT BANK 18.

    9. ISLAMIC BANKING IN PAKISTAN 19.

    10. ISLAMIC BANKING IN MALAYSIA 21.

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    BANKING SECTOR

    Banking sector has undergone tremendous changes throughout these years

    by fulfilling the dreams of thousands of people all over the world. Banks

    have provided a lot of opportunities for the public not only as a mediator

    but also as a service provider. It has built a bond with the people with ahandful of services. Even every country's financial security id vested in the

    hands of the central bank of that country. The banking sector has made a

    trust in the common people by giving out services starting from lending

    loans for different activities to being as a security locker of money.

    But in India only 40% of the people only have tasted the sweetness of the

    facilities of the banks. Still the marginalized 60% haven't got chance to go

    through the entire banking process. These downtrodden groups are keeping

    themselves away from the banking procedures because of the huge interest

    imposed by the banks. A grand welcome will be made to those initiatives

    taken, which would act in a friendly manner by providing interest free

    banking facilities would make these marginalized groups also to be a part of

    the banking sector. An interest free banking system is functioning

    successfully around the globe. This banking system is called Islamic Banking.

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    INTRODUCTION

    The Islamic banking today has become most popular and reliable financial

    system in the world. It appeared in the world scene as active players over

    three decades ago. But as many of us know most of the principles which is

    based on the Islamic banking, commonly accepted by all over the world goes

    for century then decades. Islam as a religion very clearly prohibits the Riba-

    the interest, so the basic principle of Islamic banking is the prohibition of

    Riba (interest) base transactions.

    Islamic banking system has emerged as a competitive and a viable substitute

    for the conventional banking system during the last three decades. It is

    especially true for Muslim world where presently Islamic banking strides at

    two separate fronts. At one side, efforts are also underway to covert the

    entire financial systems in accordance to Islamic laws ( Shariah). At the other

    side, separate Islamic banks are allowed to operate in parallel to

    conventional interest based banks. Pakistan and Malaysia are the tw o good

    examples of above mentioned approaches. Additionally, Islamic law

    prohibits investing in businesses considered unlawful (haram) or contrary

    to Islamic values. In recent years, Islamic banks have been created to cater

    to the growing demand, driven by globalization and the vast wealth of some

    Muslim states in Middle East and Southeast Asia, and Islamic finance has

    moved from a niche position to become a mainstream component of global

    banking system.

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    Whatis Islamic banking?

    Islamic banking refers to a system of banking or banking activity that is

    consistent with the principles of Islamic law (Shariah) and its practical

    application through the development of Islamic economics. Islamic banking

    is carried out in accordance with the rule of Shariah which is known as Fiqh

    Muamalat. It does not allowed to take Riba (interest) and create a great

    degree of fairness and equality in the conduct of banking business

    Islamic banking responds to the needs of Muslim customer, they are not

    acting as religious institutions. Like other bank their main motive is to

    maximize its profit but in case of the Islamic banking it is not there they act

    as the mediator between the savers and investors and offer custodial

    services which is found in other traditional banks. The major constraints

    which are being faced by this bank (Islamic banks) are based on the

    prescriptions in the Shariah law.

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    ORIGIN OF ISLAMIC BANKING

    Interest-free banking system seems to be very recent origin. The earliest

    references to the reorganization of banking on the basis of profit sharing

    rather than interest are found in Anwar Qureshi(1946), Naiem Siddiqi

    (1948) and Mahmud Ahmad (1952) in the late forties, followed by a more

    elaborate exposition by Mawdudi in 1950. The writings of Muhammad

    Hamidullah 1944, 1955, 1957 and 1962 should be included in this category.

    They have all recognized the need for commercial banks and their perceived

    "necessary evil," have proposed a banking system based on the concept of

    Mudarabha - profit and loss sharing.

    Inthe next 20 years or you can say that in the next two decades interest-free

    banking attracted more attention, partly because of the political interest it

    created in Pakistan and partly because of the emergence of young Muslim

    economists. Works specifically devoted to this subject began to appear in

    this period. The first such work is that of Muhammad Uzair (1955). Another

    set of works emerged in the late sixties and early seventies. Abdullah al-

    Araby (1967), Nejatullah Siddiqi (1961, 1969), al-Najjar (1971) and Baqir-al-

    Sadr (1961, 1974) were the main contributors. The early 1970s saw

    institutional involvement.

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    The Conference of the Finance Ministers of the Islamic Countries held in

    Karachi in 1970, the Egyptian study in 1972, the First International

    Conference on Islamic Economics in Mecca in 1976, and the International

    Economic Conference in London in 1977 were the result of such

    involvement. The involvement of institutions and governments led to the

    application of theory to practice and resulted in the establishment of the

    first interest-free banks. The Islamic Development Bank, an inter-

    governmental bank established in 1975, was born of this process.

    The first modern experiment with Islamic banking was undertaken

    in Egypt under cover without projecting an Islamic imagefor fear of being

    seen as a manifestation of Islamic fundamentalism that was anathema to

    the political regime. The pioneering effort, led by Ahmad Elnaggar, took the

    form of a savings bank based on profit-sharing in the Egyptian town of Mit

    Ghamrin 1963. This experiment lasted until 1967 (Ready 1981), by which

    time there were nine such banks in country.

    In 1972, the Mit Ghamr Savings project became part of Nasr Social Bank

    which, currently, is still in business in Egypt. In 1975, the Islamic

    Development Bankwas set-up with the mission to provide funding to

    projects in the member countries. The first modern commercial Islamic

    bank, Dubai Islamic Bank, opened its doors in 1975. In the early years, the

    products offered were basic and strongly founded on conventional banking

    products, but in the last few years the industry is starting to see strong

    development in new products and services.

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    Islamic Banking is growing at a rate of 10-15% per year and with signs of

    consistent future growth. Islamic banks have more than 300 institutions

    spread over 51 countries, including the United States through companies

    such as the Michigan-based University Bank, as well as an additional 250

    mutual funds that comply with Islamic principles. It is estimated that over US

    $822 billion worldwide Shariah-compliant assets are managed according

    to The Economist. This represents approximately 0.5% of total world

    estimated assets as of 2005.According to CIMB (Commerce International

    Merchant Bankers) Group Holdings, Islamic finance is the fastest-growing

    segment of the global financial system and sales of Islamic bonds may rise by

    24 percent to $25 billion in 2010.

    The Vatican has put forward the idea that "the principles of Islamic finance

    may represent a possible cure for ailing markets."

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    LARGESTISLAMIC BANKS

    Iran, Saudi Arabia and Malaysia have the biggest Shariah-compliant assets.

    Shariah-compliant assets reached about $400 billion throughout the world

    in 2009, according to Standard & Poors Ratings Services, and the potential

    market is $4 trillion.

    In 2009 Iranian banks accounted for about 40 percent of total assets of the

    world's top 100 Islamic banks. Bank Melli Iran, with assets of$45.5 billion

    came first, followed by Saudi Arabia's Al Rajhi Bank,Bank Mellatwith $39.7

    billion and Bank Saderat Iran with $39.3 billion. Iran holds the world's

    largest level of Islamic finance assets valued at $235.3billion which is more

    than double the next country in the ranking with $92billion. Six out of ten

    top Islamic banks in the world are Iranian. In November 2010, The

    Banker published its latest authoritative list of the Top 500 Islamic Finance

    Institutions with Iran topping the list. Seven out of ten top Islamic banks in

    the world are Iranian according to the list.

    The development of Islamic banks in the world continue to experience

    difficulties since the Islamic bank comes in the midst of development and

    conventional banking practices that have been entrenched in society at

    large. Constraints faced by banks (financial institutions) Shariah cannot be

    separated from the unavailability of adequate human resources and

    legislation. Although, many studies had tried to simplify the explanations of

    the implementations of Islamic banking operations.

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    This is considering that in each country, especially the majority Muslim

    community, has no supporting infrastructure in Islamic banking operations

    equally. Consequences developments in each country would have an impact

    either directly or indirectly to the development of Islamic banking in the

    world.

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    COUNTRIES USING ISLAMIC BANKING

    There are many countries which are using Islamic banking and they are more

    than 50 countries including United States through companies such as

    Michigan based university banks as well as more than 250 mutual funds that

    comply with the principles of Islamic principles.

    There are 56 shareholding member states, on the basis of paid up capital,

    the main shareholder of bank are from these countries:

    Saudi Arabia

    Libya

    Iran

    Egypt

    Kuwait

    Turkey

    Qatar

    UAE

    Pakistan

    Malaysia

    Bahamas

    Switzerland

    Luxembourg

    Indonesia

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    Iraq

    Uzbekistan

    Bangladesh

    Afghanistan

    Yemen

    Nigeria

    Kazakhstan

    And there are many more countries which are using Islamic principles.

    Thebasic condition for membership is that the prospective member country

    should be a member of the Organization of the Islamic Conference (OIC).

    The economy of Organization of Islamic Conference (OIC) combines the

    economies of other 56-57 members states that are using Islamic principles

    or running Islamic banks. Those countries have a combined GDP (at

    Purchasing Power Parity, {PPP}) ofUS$7,740billion. The richest country on

    the basis of GDP per capita at PPP is United Arab Emirates. On basis of per

    capita GDP, Qataris richest country with incomes exceeding US$108,000

    per capita.

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    SHARIAH PRINCIPLES IN ISLAMIC BANKING

    The rules and norms of Fiqh Muamalat emanated from two primary sourcesof Shariah namely the Quran and the Sunnah and other secondary and

    Authoritative sources of Islamic law.

    Islamic banking operates under a number of contracts under Fiqh Muamalat.

    Amongst the widely used concepts in Islamic banking include profit sharing

    (Mudarabha), safekeeping (Wadiah), joint venture (Musharakah), cost plus

    (Murabahah) and leasing (Ijarah).

    SHARIAH COMMITTEE

    Islamic banks and banking institutions that offer Islamic banking products

    and services (IBS banks) are required to establish a Shariah Supervisory

    Board (SSB) to advise them and to ensure that the operations and activitiesof the banking institutions comply with Shariah principles. Each institution is

    therefore required to set up a Shariah Committee to provide advice on

    Shariah issues and to ensure that its operations and activities comply with

    the Shariah principles. In Malaysia, the National Shariah Advisory Council,

    which has been set up at Bank Negara Malaysia (BNM), advises BNM on the

    Shariah aspects of the operations of these institutions and on their products

    and services. In Indonesia the Ulama Council serves a similar purpose

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    PRINCIPLES

    Islamic banking has the same purpose as conventional banking except that it

    operates in accordance with the rules of Shariah, known as Fiqh al-

    Muamalat(Islamic rules on transactions). The basic principle of Islamic

    banking is the sharing of profit and loss and the prohibition of Riba (usury).

    Common terms used in Islamic banking include profit sharing (Mudarabha ),

    safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah ),

    and leasing (Ijarah).

    TERMINOLOGIES USED BY ISLAMIC BANKS

    WADIAH (SAFEKEEPING)

    For deposit product or Wadiah contract, a bank is the custodian and trustee

    of funds. A person deposits funds in the bank and the bank guarantees

    refund of any part or the whole amount of the deposit when requested by

    the depositor. The depositor, at the bank's discretion, may be given ' HIBAH'

    (gift) as a form of appreciation for the use of funds by the bank. As a trustee

    of the items, the custodian may charge a fee to the customer.

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    BAI' AL 'INAH (SALE AND BUY-BACK AGREEMENT)

    Bai' al inah is a financing facility with the underlying buy and sell transactions

    between the financier and the customer. The financier buys an asset from

    the customer on spot basis. The price paid by the financier constitutes the

    disbursement under the facility. Subsequently the asset is sold to the

    customer on a deferred-payment basis and the price is payable in

    installments. The second sale serves to create the obligation on the part of

    the customer under the facility. There are differences of opinion amongst

    the scholars on the permissibility of Bai' al inah; however this is practiced in

    Malaysia (A set of strict conditions must be complied) and the like

    jurisdictions.

    MUDARABAH (PROFITSHARING)

    Mudarabha is a profit sharing arrangement or agreement between a capital

    provider and an entrepreneur or you can say it is a kind of partnership

    where one partner gives money to other partner to invest in commercial

    project or work which ever that person is starting. The investments is given

    by the first partner and he is called ("rabb-ul-mal") and the other person

    who manage a work or a person who takes the money and handle some

    responsibility is called (mudarib) The entrepreneur is provided with funds

    by the capital provider to undertake a business activity. Any profits made

    will be shared between the capital provider and the entrepreneur according

    to the pre-determined profit-sharing ratio. However, losses shall be borne

    by the capital provider.

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    MUSYARAKAH (JOINTVENTURE)

    This concept is normally applied for business partnerships or joint ventures.

    The profits made are shared on an agreed ratio while losses incurred, will be

    divided based on the equity participation ratio. Musyarakah (joint venture) is

    an agreement between two or more partners where each partner gives or

    provides some funds so that so that it can be used in the venture. Profits and

    losses are shared among them as I had said earlier. If a bank provides capit al

    same condition applies it is the financial risk, according to Shariah, that

    justifies the banks claim to part of the profit. Each partner may or may not

    participate in carrying out a business. A working partner gets a greater profit

    then a sleeping partner. You can also come with the difference between.

    Musyarakah (joint venture) & Mudarabha (profit sharing) in Musyarakah

    each partner contribute some capital but in Mudarabha one partner

    contribute, e.g. u can take. A financial institution, provides all the capital and

    the other partner, the other partner, the entrepreneur, provides no capital

    BAI' BITHAMAN AJIL (DEFERRED PAYMENTSALE)

    The concept of BaiBithman Ajil refers to the sale of goods on a deferred

    payment basis at a price, which includes a profit margin agreed to by both

    the parties. Like Bai' al 'inah, this concept is also used under an Islamicfinancial facility. The problem in this is that this includes linking two

    transactions in one which is forbidden in Islam.

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    BBAAII''MMUUAAJJJJAALL ((CCRREEDDIITTSSAALLEE))

    Literally Bai muajjalmeans credit sales. Technically, it is financing technique

    adopted by the Islamic banks that takes the forms Murabahah muajjal. It is

    the contract in which the bank earns a profit margin on the purchase price

    and allowed the buyers to pay the price of the commodity in future in

    installments or in lump sum. In this the profit margin and cost should be

    expressly mentioned on which the parties must agree. The price fixed for the

    commodity in the transactions can be same as the spot price or higher or

    lower than the spot price.

    WAKALAH (AGENCY)

    This is the situation when a person appoints a representative or delegates a

    duty to another party to undertake transactions on his behalf. As an agent,

    the bank will be paid a fee for the services it provided.

    IJARAHTHUMMA BAI' (HIRE PURCHASE)

    There are two contracts involved in this concept: Ijarah contract

    (leasing/renting) and Bai' contract (purchase). The contracts are undertaken

    one after the other for example, in a car financing facility, a customer enters

    into the Ijarah contract to lease the car from the owner (financier) at an

    agreed rental for a specific period. When the leasing period ends, the Bai

    contract comes into effect, to enable the customer to purchase the car from

    the owner at an agreed price.

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    HIBAH (GIFT)

    A token given voluntarily in return for loan given or benefit obtained. Hibah

    usually arises in practice when Islamic banks voluntarily pay their customers

    a 'gift' on savings account balances, representing a portion of the profit

    made by using those savings account balances in other activities.

    IJARAH

    Ijarah means lease, rent or wage. Generally, Ijarah concept means selling the

    benefit of use or service for a fixed price or wage. Under this concept, the

    Bank makes available to the customer the use of service of assets /

    equipments such as plant, office automation, motor vehicle for a fixed

    period and price.

    QARD (INTEREST-FREE LOAN)

    A loan extended on a goodwill basis and the borrower is only required to

    repay the amount borrowed. However, the borrower may, at his discretion,

    pay extra (without promising it) as a token of appreciation.

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    ISLAMIC DEVELOPMENT BANK

    Islamic Development Bank(also known asIsDB), is a multilateral

    development financing institution located in Jeddah, Saudi Arabia. It was

    founded by the first conference of Finance Ministers of the Organization of

    the Islamic Conference (OIC), convened 18 December 1973. The bank

    officially began its activities on 15 Shawwal 1395H (20 October 1975).

    KEYPEOPLE isAhmad Mohamed Ali Al-Madani (president)

    Over932 employees work over there

    THE IsDB IS ALSO KNOWN AS UNITED NATIONS GENERAL ASSEMBLY

    OBSERVER

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    ISLAMIC BANKING IN PAKISTAN

    ORIGINOF ISLAMIC BANKING IN PAKISTAN

    The process of financial system in Pakistan is coincided with the globally

    resurgence of Islamic banking in late seventies. Pakistan is one of the three

    countries in the world that has been trying to implement Islamic banking at

    national level. The process started with the presidential order to the local

    council of Islamic ideology (CII) on September 29, 1977. The council were ask

    to make a blue print of interest free economists who submitted their report

    in February, 1980, highlighting the various ways and sufficient details for

    eliminating the interest from the financial system of Pakistan. This report

    was the landmark in the effort for the setup of Islamic banking in Pakistan

    INITIATIVETAKEN IN PAKISTAN

    The Islamic banking movement in Pakistan was a nationwide and

    comprehensive. As it was a mammoth task, the switch-over plan was

    implemented in phases. The process was started by transforming the

    operations of specialized financial institutions like National Investment Trust

    (NIT), Investment Corporation of Pakistan (ICP), and house Building

    Corporation (HBFC), to the system conforming to the Islamic principles with

    effect from July 1, 1979. Separate interest free counters started operating in

    all nationalized commercial banks, and one foreign bank from January 1,

    1981, to mobilize deposits on profit and loss sharing basis. As from July 1,

    1985, all commercial banking operations were made interest -free. From

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    that date, no bank in Pakistan, including foreign banks, was allowed to

    accept any interest-bearing deposits. All existing deposits in banks were

    treated to be on the basis of profit and loss sharing. However, foreign

    currency deposits/loans were continued to govern on interest basis. The

    government meanwhile also passed Mudarabha Companies Act 1984,

    enabled financial institutions or business groups to setup special Mudaraba

    Companies in a country.

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    ISLAMIC BANKING IN MALAYSIA

    ORIGINOF ISLAMIC BANKING IN MALAYSIA

    In Malaysia, the roots of Islamic banking go back to 1963 when the

    government established Tabung Hajji or Pilgrims Management and Fund

    Board. The institution was established to invest the savings of the localMuslims in interest In Malaysia; the roots of Islamic banking go back to 1963

    when the government established Tabung Hajji or Pilgrims Management and

    Fund Board. The institution was established to invest the savings of the local

    Muslims in interest

    The first call for separate Islamic bank was made in 1980, in a seminar

    held in the National University of Malaysia. The participants passed aresolution requesting the government to pass a special law to setup an

    Islamic bank in the country. Responding to the request, the government s et

    up a National Steering Committee in 1981 to study legal, religious and

    operational aspects of setting up an Islamic bank. The committee

    established the blue print of a modern Islamic banking system in 1983,

    which later enabled the government to establis h an Islamic bank and to

    issue non-interest bearing investment certificates.

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    INITIATIVETAKEN BYMALAYSIA

    The establishment of bank of Islam in Malaysia berhad (BIMB) in July 1983

    marked a milestone for the development of Islamic bank and financial sys tem

    in Malaysia. BIMB carries out banking business similar to other commercial

    bank, but along the principles of Islamic laws (Shariah). The bank offers

    deposit taking product such as current and saving deposits under the concept

    ofWadiah (guaranteed custody) and investment deposit under the concept of

    Mudarabha (profit sharing). The bank grant provide finance facility such as

    working capital finance under Murabahah (cost plus financing), house

    financing under Bai Bithsmsn Ajil (deferred payment sales), leasing under

    Ijarah (leasing) and project financing under Musharakah (joint venture),

    BIMB has grown tremendously since its inception.

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    PotBoiler Islamic Banking

    As the subject is pot boiling we would like to start with flashing up the light

    on Islamic banking with the depth knowledge from last 18 months Islamic

    banking had became a hot topic for the people in our country. There has

    been a debate on this topic by many famous personalities whether this

    Islamic banking should be permissible in India has lots of dimension. There

    were protest against this banking also by RSS leaders and they had done

    protest just because the word Islamic was there and they have thought that

    this bank would only for the Muslims but they havent thought of doing any

    research and never want to know what actually Islamic banking is ?

    FIRST ISLAMIC BANK IN INDIA

    But it doesnt have the last long effect after so many controversies and

    problems Islamic Banking in now going to be launch soon in India.

    State government had said that Islamic bank would going to be establish in

    Kochi as soon as possible but the bank didnt opened and the date keep on

    expanding and on 29 march 2011 an article by TimesWireService.Com

    Correspondent, said that those people who are in support of interest free

    banking system will not have to wait for long because it is going to be

    establish in Mumbai. Reports have surfaced that the Reserve Bank of India

    may soon allow a foreign Islamic bank to open its b ranch in Mumbai

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    The meeting which was held on September 12 at Kozhikode was to discuss

    the steps to be taken to set up the first Islamic bank in India. The Kerala

    State Industrial Development Corporation (KSIDC) would have 11 percent

    stake in the proposed banking firm. It will be registered as a Non-Banking

    Finance Company (NBFC) in the beginning and later on will be transformed

    into 100% Shariah-compliant bank.

    An initial capital of Rs 500 cr. (Rs 5 billion) was to be mobilized from leading

    non-resident Indians (NRIs) and Indian business houses. The bank was to

    invest all its funds in wealth generating investment avenues and will

    distribute profit to its shareholders. And they had said as registration

    formalities will be completed. Then they will establish the first Islamic bank

    in India in mid 2010.

    The first Islamic bank may be a Turkish bank because Turkish bank has asked

    for the permission from reserve bank of India to open its branch so that it

    could offer Shariah-compliant lending in the country.A finance ministry official said: "So far the bank has only sought permission

    to open a representative office. We are considering their application." He

    further added: "After the global economic crisis, RBI has been stringent with

    allowing foreign banks in the country. As a part of its liberalized policy for

    foreign banks, it has now granted permission to Bank Asya."

    It is understood that the RBI has requested the Central government to look

    into the case. Any positive development will take place within 45 days that is

    the time that the RBI has given to the Turkish bank. Bank Asya is a new

    launch in Turkey as it came into existence in 1996. Since then it has

    expanded with an aim to develop interest-free banking products. In Turkey

    the bank is hugely popular with some 179 branches.

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    WhyIslamic banks inIndia?

    After discussing the different principles of Islamic banking, this is an attempt

    to explore the feasibility of Shariah banking in India. The rise of interest as

    a blood sapping evil is alarming. To get rid of menace and save the nation

    from the clutches of interest, suitable amendment should be made in

    banking act. Indira Gandhis slogan, GARIBI HATAO and ROTI KAPDA

    MAKAAN as enunciated by Zulfikar Ali Bhutto are still relevant today as it

    was in the early seventies. Yet even today, horrendous disparities exist

    between different segments of the Indian society. The majority of the

    unorganized sector; workers; semi skilled workers, small farmers are not

    able to have the bank account they are all non-bankable. Access to finance

    by the poor and the vulnerable groups is prerequisites for poverty reduction

    and social cohesion. Such financial apartheid is one of the main cause of

    exclusion of the majority of the population in terms of growth. Government

    must provide the disadvantage classes with the tools they need to improve

    their condition. The Indian banking sector has opened up considerably in the

    past decade or so and openness to the interest free banks is the logical next

    step. Islamic banking is the one way to ameliorate the disadvantaged

    classes. The potential benefits of allowing Islamic banking include; decreased

    economic disparity between the dos and donts, better integration, and

    consequently accelerate economic growth. Government of India can leap a

    step toward the fulfillment of the Indira Gandhis much cherished dream of

    GARIBI HATAO by reforming its sector and allowing the establishment of

    Islamic banking in India

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    CHANGE NEEDED IN INDIAN

    BANKING SYSTEM

    Famous Islamic banking scholar Mufti Abdul Qader Barkatullah said that the

    comprehensive changes are needed in Indian banking laws in order to

    implement interest free economic system. Comprehensive change is needed

    in the Indian banking laws in order to implement interest-free economic

    system, said famous Islamic banking scholar Mufti Abdul Qader Barkatullah.

    It is difficult to bring full -fledged Islamic banking in the present conditions in

    India.

    Mufti said that majority of the countries followed economic systems that

    were about half a century old. But, living conditions and development ideas

    have moved a lot forward. Change is needed in economic matters also as per

    the change in the other fields.

    India is following the laws of Britain in the bank ing field. Indian banks cannot

    invest capital in trade and others as in Britain. At the same time, interest is

    given to the investors and levied from those who take loans making rupee a

    good for trade. 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.

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    The global economic downturn has not affected the Islamic banks in Britain

    much, said Mufti who is the Islamic financial adviser of several famous banks

    in Britain. The relevance of the Islamic banking system increased in the UK

    when a good percentage of investments turned to interest-free banking and

    a considerable share of investments came from the Gulf regions. As a result,

    the Islamic Bank of Britain was established in 2004. The bank has opened

    seven branches within five years.

    The relevance of such banks is increased by the fact that about 20 percent

    account-holders are non-Muslims. Mufti added that investing in the real

    estate field and others, where scope of loss is comparatively less, would be

    better for those working on the field of Islamic banking in India.

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    THE INSTITUTE OF ISLAMIC BANKING

    AND FINANCE

    The Institute of Islamic Banking and Finance incorporated with the

    Government of Andhra Pradesh at Hyderabad, India under Public Societies

    Registration Act 1995 is the countrys maiden effort at institutionalizing

    education at all levels in the field of Islamic Economics, Banking and Finance.

    The Institute is a registered non-profit, equal opportunity, professional

    educational research and training institution totally independent, non

    affiliated to any University nor accredited to retain complete academic

    autonomy and intellectual independence regarding course content,

    methodology and orientation.

    The Dean has the sole discretionary authority to design and implement

    course curriculum with suggestions and advice from an Academic Council

    constituted and updated with experts in respective fields. The Dean is

    suitably assisted in this by a team of distinguished faculty and alumni of the

    Institute.

    This pioneer institution apart from being Indias first and only of its kind, is

    privileged to offer the Post Graduate Diploma in Islamic banking and Finance

    in twelve countries around the world and has received enquiries/requests

    for academic collaborations for setting up similar institutions/branches from

    more than fifteen countries worldwide.

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    Distinguished alumni have successfully placed themselves in leading Islamic

    banks/Islamic financial institutions in the Middle East and elsewhere

    acknowledging the contribution of the Institute in shaping their careers.

    Though the Institute does not propose any placement assurances yet the

    Diploma has industry acceptability and is widely popular in conjunction with

    high degree of core competence backed up by good educational

    background.

    The Institute by its own efforts has created a niche for itself not only in the

    Islamic Finance community but also in software companies, social net

    working enterprises, NGO's and other professional bodies.