ISLAMIC BANKING

PRESENTED BY:-MH.SHAHBAZ FAROOQUI

Islamic banking is banking or banking activity that is consistent with the principles of sharia and its practical application through the development of Islamic economics.

Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as riba or usury) for loans of money.

Investing in businesses that provide goods or services considered contrary to Islamic principles is also haraam ("sinful and prohibited").

INTRODUCTION

Islamic financial transaction terminology

  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.

Bai' bithaman ajil (deferred payment sale)

This concept refers to the sale of goods on a deferred payment basis at a price, which includes a profit margin agreed to by both parties.

Mudarabah

"Mudarabah" is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise.

Murabahah

This concept refers to the sale of goods at a price, which includes a profit margin agreed to by both parties.

Bai Salam

Bai Salam means a contract in which advance payment is made for goods to be delivered later on

Hibah (gift)

This is a token given voluntarily by a debtor to a debtor in return for a loan.

Ijarah Ijarah means lease, rent or wage.

Musharakah (joint venture)

Musharakah is a relationship between two parties or more that contribute capital to a business and divide the net profit and loss pro rata

Qard Hassan / Qardul Hassan (good loan/benevolent loan)

This is a loan extended on a goodwill basis, and the debtor

is only required to repay the amount borrowed.

Sukuk (Islamic bonds)

Sukuk, plural of Sakk, is the Arabic name for financial certificates that are the Islamic equivalent of bonds.

Riba

The word "Riba" means interest, usury, excess, increase or addition.

According to Shariah terminology, implies any excess compensation without due consideration (consideration does not include time value of money).

The definition of riba in classical Islamic jurisprudence was "surplus value without counterpart", or "to ensure equivalency in real value", and that "numerical value was

immaterial."

IN INDIA, FIRST ISLAMIC BANK INTRODUCED IN KERALA…….

How do you perceive the recent Kerala High Court order regarding Islamic banking?

What is the future of Islamic banking in India?

In simple terms what is Islamic banking and how it can be beneficial for common man?

Is the term Islamic the main obstacle for the popularity of Islamic Banking, if so how can you convince others? How a business man will get assistance from Islamic banking for fund raising?

BUT SOME QUESTION ARISES RELATED TO LAUNCHED ISLAMIC BANKING IN INDIA

  The main difference between Islamic and conventional:-

Banking is that Islamic teaching says that money itself has no intrinsic value, and forbids people from profiting by lending it, without accepting a level of risk –

In other words, interest (known as "riba") cannot be charged.

To make money from money is prohibited – wealth can only be generated through legitimate trade and investment.

Any gain relating to this trading is shared between the person

providing the capital and the person providing the expertise.

DIFFERENCE B\W ISLAMIC BANKING OR CONVENTIONAL BANKING

Progress of Islamic Banking Themes in India

There is a growing awareness about the benefits of Islamic Banking concepts among Indian financial sector also.

It is being increasing felt that there is an enormous potential market for Islamic banking products in India.

As we know Islamic banking prohibits use of money for activities related to gambling and wine as well as prohibits interest-based lending.

Islamic Banking can help India by providing long term funds for infrastructure development.

Islamic banking will provide financial alternatives to 170 million Indian Muslims who are second largest population after Indonesian Muslims, of which 70% to 80% who do not deposit money in banks because of religious beliefs.

Finance Minister P. Chidambaram and welcomed this new idea after meeting a delegation of Bankers.

Palami Manickam said that Islamic banking addresses the concerns of the poor and helps in building a „more just adaptable socio-economic order‟.

The Life Insurance Corporation of India (LIC) started a new international joint Venture company in the name of „Indo-Saudi Insurance Company‟ which will be the first insurance company to Introduce Islamic Insurance.

Conclusion

The preceding discussion makes it clear that Islamic banking is not a negligible or merely temporary phenomenon.

Islamic banks are here to stay and there are signs that they will continue to grow and expand.

It is especially in this sense that Islamic banks can play a catalytic role in stimulating economic development.

In many developing countries, of course, development

banks are supposed to perform this function.