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ZENITH International Journal of Business Economics & Management Research
Year : 2012, Volume : 2, Issue : 7
First page : ( 137) Last page : ( 146)
Online ISSN : 2249-8826.

Intrest free banking model: Is IT possible in India?

Dr. Kumar Pavnesh

Associate Professor, IILM-Academy of Higher Learning, Lucknow.

Abstract

Interest free banking is the basic foundation of the Islamic banking. It is a system of banking that consistent with Islamic law principles and guided by Islamic economics. Many Islamic Banks have sprung up over the last few years. These changes are occurring both in Muslim and in western countries, and are driven by a global trend amongst Muslims to become more observant of their faith. It might have been the reason why Islamic Banking emerged, however, today interest free banking is sought by Muslims and non-Muslims due to the benefits it offers. Industry size is currently estimated at more than $400 billion, with projected growth of 15% per annum. Financial institutions around the globe are trying to keep pace with the growing demand for Sharia’h compliant products and services to meet the expectations of there clients. Interest free banking can help the economies by assembling savings needed for financing major investment projects. In India according to the 2001 census, Hinduism accounted for 80.5% of the population of India. Islam (13.4%), Christianity (2.3%) and Sikhism (1.9%) are the other major religions. The Muslim population in India is the third largest in the world. Islamic Banking can help Indian government in achieving the target related to financial inclusion. This paper intends to review the literature related to Islamic Banking, difference between conventional and interest free banking, advantages of this model to the banks and the legal status of interest free banking in India.

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Keywords

Islamic Banking, Riba, Interest free Banking.

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