Slide 2: Introduction to islamic banking Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) . Sharia prohibits, (Riba, usury) . i.e, interest free business. Slide 3: EVOLUTION OF ISLAMIC BANKING Islamic banks are seen to involve themselves as financial intermediaries and investment oriented institutions in bringing about wellbeing of the community, society and the economy in the light of Shari’ah NATURE OF BANKING SERVICES : NATURE OF BANKING SERVICES Set of banking services are same as conventional Bank.
Clearing mechanisms, bank drafts, bills of exchange, travelers’ cheques, etc. Are offered.
Current accounts, savings accounts, and investment accounts. Are offered by conventional banking Principles of Islamic Banking : Principles of Islamic Banking Justice, equality and solidarity
Forbidden objects and creatures.
Acquisition of property rights.
Property (wealth) should be used in a rational but fair Way.
No gain without either effort or liability Rules of Islamic Banking : Rules of Islamic Banking Any predetermined payment over and above the actual amount of principal is prohibited.
The lender must share in the profits or losses arising out of the enterprise for which the money was lent.
Making money from money is not Islamically acceptable
Gharar (Uncertainty, Risk or Speculation) is also prohibited.
Investments should only support practices or products that are not forbidden -or even discouraged- by Islam. Slide 7: • Riba as interest (differences among
• Interest in all forms prohibited
• All interest-based transactions should
• Interest-based transactions are seen as ‘unjust’:
risk on the borrower Basic Framework:
Prohibition of Riba Slide 8: • To help Muslims, execute their financial dealings in social values of the Shariah
• To Serve all Muslim communities in mobilising and utilising the financial resources.
• To serve the Islamic communities strenthening the oconomic ability Objectives of Islamic Banks: Primary Characteristics of Islamic Banks : Primary Characteristics of Islamic Banks Prohibition of Interest
Low Consumer Lending
Profit and Loss Sharing
High Real Sector Investing Slide 10: Basic Framework:
Concept of Money • Money as a form of wealth
– primary function: medium of exchange
– No price should be charged for money
– Basic rule in lending: return an equal amount TYPES OF ACCOUNTS : TYPES OF ACCOUNTS Deposits available ISLAMIC BANKS’ MODES OF FINANCING : ISLAMIC BANKS’ MODES OF FINANCING Slide 13: Investment financing Trade financing lending other financial facilities loans with a service charge no cost loan Over drafts musharaka mudarabha Mark up trade financing leasing Hire purchase Sell and buy back Letters of credit MODES OF FINANCING Advantages of Islamic Banking : Advantages of Islamic Banking Challenges for Islamic banks : Challenges for Islamic banks Establishing appropriate risk and liquidity management techniques
Achieving consistent Shari’ah supervision
Managing the talent pool
Addressing legal and tax restrictions Slide 17: Market share of islamic banking REASON AND NEED OF ISLAMIC BANKING IN INDIA : REASON AND NEED OF ISLAMIC BANKING IN INDIA Islamic banks can give inclusive growth along with control over inflation.
Equity finance is extended by lower cost of credit.
It provides equitable share of profit.
It provides small amount of loans CONCLUSION : CONCLUSION Islamic banking being a young concept can help development of poor economy.
Though having few draw backs it has its own advantages to stand on. ACKNOWLEDGMENT : ACKNOWLEDGMENT We would like to thanks Mr. Viral Dharani our faculty for giving us the topic of “ISLAMIC BANKING” which being a very new concept is now known to us
We received bundles of knowledge and an updated news of the economics. Slide 21: PRESENTED BY Monali Shah 19 komal Salgaonkar 17 Tanvi Sidhaye 7 Aparna Vaze 20 Seema Nishad 30