Islamic Banking in India
Islamic Banking refers to a system of banking activity that is consistent with the principles of Islamic rulings (also called Sharia in Arabic). Islamic banking has been gaining momentum after the recent global economic meltdown and many countries, including India, are opening their doors for it. India is preparing to launch Islamic Banking in near future. There are many countries in the world now, which has recognized the need of Islamic Banking.
There are two fundamental principles of Islamic Banking, first one is the sharing of profits and losses and the second one is the prohibition of collection and payment of interest. Dubai Islamic Bank is the world’s first Islamic Bank which was launched in 1975, but now Malaysia has become the hub of Islamic Banking and Saudi Arabia, Kuwait and Bahrain are following the trend. Even countries like China, South Korea are implementing Islamic banking since it has become evident that there is something structurally wrong with the conventional banking system after the global financial crisis of 2008.
India does not want to be left out of this global development and lose the benefit of foreign direct investment in this sector. According to the financial analysts, no financial institution that practiced Islamic banking looked for bailout packages during the global recession. Not a single Islamic bank needed or sought for bailout during the global recession, which started during last quarter of 2008 in US and the banks like, Scotland Bank, Bank of America were bailed out.