CompetitiveExams

Islamic Banking in India  It is banking practiced as per the Islamic principle as prescribed in the shariah known as Fiqh al-Muamalat (Islamic rules on transaction). The Islamic law prohibits interest on both loans and deposits. Interest is also called riba in the Islamic discourse. The argument against interest is that money is not a good and profit should be earned on goods and services only not on control of money itself. But Islam does not deny that capital, as a factor of production deserves to be rewarded. It, however, allows the owners of capital a share in a surplus which is uncertain. It operates on the principle of sharing both profits and risks by the borrower as well as the lender. As such the depositor cannot earn a fixed return in the form of interest as happens in conventional banking. But the banks are permitted to offer incentives such as variable prizes or bonuses in cash or kind on these deposits. The depositor, who in the conventional banki...