Islamic Banking in India: Opportunities and Challenges

The Muslim Population of India is 14% that is much more than the number of Muslims in the countries that are dominated by the Muslim community. Islamic Economics and Sharia’h (Islamic law) are two basic principles on which Islamic banking depends upon. Moreover, Islamic banking is a conventional banking system rather than being called religious banking system. The system facilitates interest-free loan services. The system is operating successfully as an alternate banking system in approx. 75 countries. Many economists of India has supported to bring the interest-free profit-sharing banking system in India and it has been suggested to the government because it may help the country in reaping the diplomatic advantage. However, legal institutions and RBI did not issue a license to this banking system as it was anticipated that it might create legal deterrents. The paper discusses the opportunities and challenges that may occur with the legal adoption of the Islamic Banking System.