ISLAMIC BANKING IN INDIA : A PATH TOWARD ACHIEVING FINANCIAL INCLUSION AND SUSTAINABILITY

1. Islamic Banking in India: A path
Toward Financial Inclusion and
Sustainable Development
PRESENTED BY:
Jahfar Puthan Peediyekkal
ROLL NO:2348349

2. CONTENTS
 INTRODUCTION
 CONCEPTUAL FRAMEWORK
 FINANCIAL INCLUSION THROUGH ISLAMIC BANKING IN INDIA
 REVIEW OF LITERATURE
 RESEARCH GAP
 OBJECTIVES OF THE STUDY
 HYPOTHESIS
 TENTATIVE RESEARCH METHODOLOGY
 PROBABLE IMPLICATIONS AND USE OF STUDY
 REFERENCES

3. INTRODUCTION
 India is the world's sixth largest economy in terms of nominal GDP and third largest in purchasing
power parity.
 Contradictory to the fact that, India May to become the country with the worlds’ highest number of
people living in extreme poverty,
 World bank report on poverty: (2013) Third of the world’s poorest living in India
 Planning commission of India :(2012) 21% of population living in below poverty line
 The state should address all society with justice, brotherhood, and social welfare.
 The present banking system prevailing in India is not sufficient to meet the requirements of all
sections of society
 Islamic banking (based on Islamic sharia) can play a key role in providing economic justice and
eliminating disparities.

4. CONCEPTUAL FRAMEWORK
 India is the country of different religions, cultures, beliefs, linguistic heritages, castes, and socio-economic
backgrounds
 (Census 2011). Islam is the second largest religion in India with 14.2 % of the country's population or roughly 172
million people identifying as adherents Islam
 (Pew research center, 2015) Indian Muslims projected to rise to more than 311 million by 2050 (11% of the global
total),largest population of Muslims in the world.
 Current situation of Indian Muslims is very vulnerable with the highest percentage of illiteracy, higher
unemployment and low level of income and higher poverty rate.
 By accommodating of the full-fledged Islamic banking system in India will be a gigantic leap forward towards the
minimization of economic disparity.
 Islamic banking will also facilitate the entrepreneurship development for all entrepreneurs who had the sound
proposal for starting business operation, but the scarcity of collateral security.

5. FINANCIAL INCLUSION THROUGH ISLAMIC
BANKING IN INDIA
 RBI defines Financial Inclusion as “process of ensuring access to appropriate financial products and
services needed by all sections of the society in general and vulnerable groups such as weaker sections
and low income groups in particular.”
 Sachar Committee Report(2005): Reveals that on many indicators of Muslims are behind even the
SC/ST Community especially in terms of financial inclusion
 Islamic finance now the largest alternative financial system in the world today growing at double digit
rates
 Growing list of minority Muslim countries who have embraced Islamic finance are
(UK, USA&CANADA, FRANCE, IRELAND,AUSTRALIA,SINGAPORE, SRI LANKA etc…)

6. REVIEW OF LITERATURE
Faisal Fasih
(2013)
Islamic financial institution of India: Progress, Problems and Prospects, stated that in India there are
about 300 Islamic financial institutions but very little is known about their functioning, socio-economic
performance and potential.
Vasu
(2016)
While discussing the future of Islamic banking and finance in India discussed the interest free
mechanism as an essential feature of the Islamic finance. Although banking without interest seems to
be a misnomer, as one cannot think of the concept of lending without interest, the concept is catching
up with the world,
Haque , Lone
and Thakur
(2017)
Undertook a study using SWOT analysis and used the Michal Porter’s five forces model and explained
how Islamic finance is viable and better for India. In the support of their statement that Islamic finance
is better for India,
Tripathy
(2013)
Reported that Muslims constitute over 15 percent of the population in India but they hold only 12
percent of the accounts in the 27 public sector banks of India as for as priority sector advances are
concerned.
Khan K A
(2014)
He concluded that the future prospects of Islamic banking in India is very good and it should be looked
at as “Interest free banking” through a broad kaleidoscope and not through a narrow religious prism.

7. REVIEW OF LITERATURE
Pandu , A.,
and Hussain ,
M.G.
(2016)
Studied the introduction of Islamic banking in India and suggested a legal framework. They suggested
that though there are constraints in the implementation of Islamic banking in India due to the provisions
in the Banking Regulations Act, special provisions could be created, on the lines of provisions for
NBFCs, to permit Islamic banking in India so that resources could be attracted from the Middle Eastern
countries. This would be useful for the infrastructure facilities and this in turn will drive the economic
growth of the country.
Abdul Aziz
Abdullah
(2016)
The results of this study showed that Islamic banking services are making headway among non-
Muslims and they concluded that most respondents strongly thought that Islamic banking would
dominate conventional banking in the near future in Malaysia.
Jeet Singh
and Preeti
Yadav
(2013)
Studied the growth and potential of Islamic banking in India and stated that Islamic banking has been
misunderstood in India as a religious charitable venture restricted to the poverty-ridden and
economically downtrodden Muslim community.
Bhat, Z. A
(2013)
Studied the nature, scope and feasibility of Islamic banking in India and stated that since India needs
huge investments in its infrastructure building, Islamic banking can provide interest-free loans to fulfill
the need and therefore, a huge potential exists for Islamic banking in India but it will need some strong
policy decisions to make it a reality.

8. RESEARCH GAP
Numerous studies have been performed since the inception of the modem Islamic banking and finance.
Conceptual issues underlying interest free financing.
Adequate work is done by the Indian authors in the field of Islamic banking and finance. In Indian
context most of the studies focus on the concept of Islamic banking, its feasibility and effect of different
factors on Islamic banking. There is a lack of researches on the main determinants of Islamic banking in
India.
1) Financial inclusion
2) Role of Islamic finance in attaining Sustainability
Therefore, this pioneering research is an effort to fill this gap and is carried out to examine the prospects
of Islamic banking in India by studying various aspects of financial inclusion and sustainability.

9. OBJECTIVES OF THE STUDY
To identify the determinants of Islamic banking in india
To explore the role of Islamic banking in achieving
sustainability
To explore the potential of Islamic banking in promoting
financial inclusion of unbanked masses

10. HYPOTHESIS
H01
• Significant differences do not exist in financial inclusion and
sustainability towards Islamic banking with respect to India.
H02
• Financial inclusion has no significant effect on the Islamic banking
H03
• There is no casual relationship between Islamic banking and
financial inclusion

11. TENTATIVE RESEARCH METHODOLOGY
1.Interview of Subject Experts and Service Providers
Primary Data
A mix of judgmental and snowball sampling will be used for choosing experts
Data will be collected:
Economic, political, regional, religious issues related to Islamic banking and financial inclusion
2.The study is descriptive in nature.
Available secondary data from reports issued by
Reserve Bank of India,
Ministry of Finance and
World Bank will extensively used for the study.
News articles, books and authorized internet sources will use and which will be enumerated and recorded

12. PROBABLE IMPLICATIONS AND USE OF STUDY
 This work is based on a survey both of experts and expected
consumers .Hence, a representative sample is mandatory. Due care
was taken to arrive at an appropriate sample. However, a larger
sample size may lead to better results.
 The proposed framework will assist not only policy makers in
accommodating Islamic banking in Indian financial system but also
help to financial inclusion of unbanked masses

13. REFERENCES
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 [4] Banu, S. (2014). Islamic Banking in India. Global Journal Finance and Management, Volume 6, Number 3 (2014), 259-264.
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15. END OF PRESENTATION
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