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Islamic Banking in India : RBI Proposes to Open in Indian Banks

Islamic Banking in India : RBI Proposes to Open in Indian Banks.

The Reserve Bank of India (RBI) planning to open Islamic Windows in conventional banks gradually to interest-free banking by the introduction of shariah complaint or Islamic banking.

The central bank RBI’s decision of Islamic window proposal is based on the examination of legal, technical and regulatory issues to introduce Islamic Banking in India and its feasibility study is based on the recommendations of IDG (Inter-Departmental Group).

Islamic Banking in India

Our Indian Banks doesn’t have experience in implementation of Islamic banking. So this will be introduced in conventional banks on a gradual basis by the final orders of the RBI and Indian Finance Department by considering various matters of Islamic laws.

What is meant by Islamic Banking?

A banking system that is based on the principles of Islamic laws and guided by Islamic economics is referred as Islamic Banking.

Basic Principles of Islamic Banking:

1. Sharing the profit and loss.
2. Prohibition of Collection and Payment of interest. (collecting interest is not permitted under Islamic law)


Under Islamic banking system, the profit/loss is used to share to facilitate a financial transaction for some types of loans.The borrower only needs to pay back the amount owed to the lender but the borrower can choose himself to pay the lender a small amount of money to serve as gratuity (gift,reward).

Under this system of banking, all the undertakings must have to follow Islamic morals and it could be considered as ethical investments.

Which is the first full-fledged Islamic Bank formed in the world in 1975?
The Dubai Islamic Bank.

Which is the first Islamic bank in India?
Al Huda. (that was setup at kochi in kerala).

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