ISLAMIC BANKING IN INDIA – AN APPROCH TOWARDS THE GROWTH AND POTENTIAL

BANKING AND FINANCE

The potential for Islamic Banking in India lies in these two points namely; (a) India could be a significant market for Islamic Banking Institutions due to its large Muslim population; and (b) However, it is still subject to a favorable change in regulatory environment and increased awareness among Muslims and India. This paper explores the basic principles and concepts in Islamic Banking and reviews the potential of Islamic Banking in India. The paper highlights the financing modes of Islamic Banking and presents the major issues and constraints of Islamic Banking. Many studies finds that India has the potential of emerging as a significant market for Islamic banking institutions, provided there is a favorable change in regulatory environment and increased awareness among Muslims and India as a whole. Islamic banking has unfortunately been misunderstood in India as a religious charitable venture restricted to the country‘s poverty-ridden and economically downtrodden Muslim community. Even years of successful Islamic banking operations and its phenomenal growth around the world have failed to demolish this myth. RBI and the Ministry of Finance should examine Islamic Banking as a viable alternative to tackle the macro economic problems we are presently confronted with. Hope the new RBI Governor will consider it to control liquidity and inflation. When Islamic banking reaches Indian, it will be welcomed as a vibrant, modern and progressive alternate financial system, not as a rudimentary, indigenous and outdated method of finance. Today, Islamic banking is the buzzword in the global financial world with all the essential ingredients of modern day banking—sans interest.

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