This document discusses monetary policy and Islamic banking. It begins by defining Islamic banking as a system that is in line with Islamic principles and avoids Riba (interest). It then discusses different types of Riba, including Riba an-Nasi'ah (interest on delayed loans) and Riba al-Fadl (exchange of unequal quantities of the same commodity). It also discusses the prohibition of interest in Islam. The document outlines the objectives, tools and targets of monetary policy, including money supply targets and interest rate targets. It notes some limitations of monetary policy, such as time lags and difficulties with forecasting.

1. MONETARY POLICY AND ISLAMIC BANKING
• ARSLAN MEHMOOD BITF11M016
• ZAFAR IQBAL BITF11M024
• M.ABUBAKAR BITF11M052
• UMAIR YAQOOB BITF11M059
• UMER SHAFIQ BITF11M060

2. DEFINATION OF ISLMAIC BANKING & RIBA
BY :
RANA UMAR SHAFIQ
BITF11M060

3. WHAT IS ISLAMIC BANKING?
ISLAMIC BANKING IS DEFINED AS BANKING
SYSTEM WHICH IS IN CONSONANCE WITH
THE SPIRIT, ETHOS AND VALUE SYSTEM OF
ISLAM AND GOVERNED BY THE PRINCIPLES
LAID DOWN
“BY ISLAMIC SHARIAH”

4. WHAT DOES IT REALLY MEANS ?
IN PRACTICAL SENSE , ISLAMIC BANKING IS THE
TRANSFORMATION
OF CONVENTIONAL MONEY LENDING INTO
TRANSACTIONS BASED ON TANGIBLE ASSETS AND REAL
SERVICES.

5. WHAT IS THE PHILOSOPHY OF ISLAMIC
BANKING?
THE PHILOSOPHY OF ISLAMIC BANKING TAKES THE LEAD FROM
ISLAMIC SHARIAH.ACCORDING TO ISLAMIC SHARIAH, ISLAMIC
BANKING CANNOT DEAL IN TRANSACTIONS INVOLVING
INTEREST/RIBA

6. WHAT IS MEANT BY RIBA?
THE WORD "RIBA" MEANS EXCESS, INCREASE OR ADDITION, WHICH
CORRECTLY
INTERPRETED ACCORDING TO SHARIAH TERMINOLOGY, IMPLIES ANY
EXCESS COMPENSATION WITHOUT DUE CONSIDERATION
(CONSIDERATION DOES NOT INCLUDE TIME VALUE OF MONEY)

7. VERSES OF QURAN (SURAH AL
BAQARAH 2:278-9)
"O THOSE WHO BELIEVE; FEAR ALLAH AND GIVE UP WHAT STILL REMAINS OF THE
RIBA IF YOU ARE BELIEVERS.
BUT IF YOU DO NOT DO SO, THEN BE WARNED OF WAR FROM ALLAH AND HIS
MESSENGER.
IF YOU REPENT EVEN NOW, YOU HAVE THE RIGHT OF THE RETURN OF YOUR
PRINCIPAL; NEITHER WILL YOU DO WRONG NOR WILL YOU BE WRONGED."

8. KINDS OF RIBA
BY :
ARSLAN MEHMOOD
BITF11M016

9. WHAT ARE THE DIFFERENT KINDS OF RIBA?
THERE ARE TWO KINDS OF RIBA:
 RIBA-AN-NASIYAH/RIBA-AL-QURAN
 RIBA-AL-FADL

10. RIBA AN NASIYAH/RIBA AL-QURAN:
IT BENEFITS ONE THE COUNTERPARTIES IN THE
FORM OF A SURPLUS OR EXTRA AMOUNT DUE TO
DELAY OF DELIVERY OF HIS SIDE OF THE
TRANSACTION

11. HADITH MUBARIKA :
IT IS REPORTED BY HARITH IBE ABI USAMAH IN HIS MUSNAD THAT SAYYIDNA ALI
RADI-ALLAHU
ANHU REPORTEDLY REFERRED THAT THE HOLY PROPHET SAID:
ALAYHI WA SALLAM, SAID THAT:
"EVERY LOAN THAT DERIVES A BENEFIT (TO THE LENDER) IS RIBA"6.
(‫لئے‬ ‫کے‬ ‫دہندہ‬ ‫قرض‬)‫قرض‬ ‫ہر‬ ‫ماخوذ‬ ‫فائدہ‬‫ہے‬ ‫سود‬

12. EXAMPLE OF RIBA-AL-NASIYAH/INTEREST
IF MR. A LENDS RS.100 TO MR. B (A BORROWER)
WITH A CONDITION THAT MR. B SHALL RETURN
HIM RS.110 AFTER ONE MONTH. IN THIS CASE, THE
EXTRA AMOUNT OF RS. 10 IS RIBA OR INTEREST.

13. RIBA-AL-FADL:
• A SURPLUS RIBA COMES INTO EXISTENCE IN A SALE
TRANSACTION THAT INVOLVES THE EXCHANGE OF ONE
RIBAWI COMMODITY (SUCH AS DATES, WHEAT, ETC) FOR
THE SAME TYPE OF COMMODITY BUT DIFFERENT
AMOUNT OR WEIGHT.

14. RIBA-AL-FADL(CONT..)
“HADITH MUBARIKA“
"GOLD FOR GOLD, SILVER FOR SILVER, WHEAT FOR WHEAT, BARLEY FOR BARLEY,
DATES FOR DATES AND
SALT FOR SALT, LIKE FOR LIKE, PAYMENT MADE HAND BY HAND. IF ANYONE GIVES
MORE OR ASKS
FOR MORE, HE HAS DEALT IN RIBA. THE RECEIVER AND GIVER ARE EQUALLY
GUILTY"

15. RIBA-AL-FADL: (CONT..)
DURING THE DARK AGES, ONLY THE FIRST FORM (RIBA AN
NASIYAH) WAS CONSIDERED TO BE RIBA. HOWEVER, THE
HOLY PROPHET (PEACE BE UPON HIM) ALSO CLASSIFIED
THE SECOND FORM
(RIBA-AL-FADL) ALSO AS RIBA.

16. INTEREST AND PROHIBTATION OF INTEREST
BY :
• MUHAMMAD UMAIR YAQOOB
• BITF11M059

17. WHAT IS INTEREST?
INTEREST MEANS GIVING AND/OR TAKING OF
ANY EXCESS AMOUNT IN EXCHANGE OF A
LOAN OR ON DEBT.

18. IS THERE ANY DIFFERENCE BETWEEN
INTEREST AND
RIBA?
IT CARRIES THE SAME MEANING/VALUE AS THAT
OF RIBA AS DEFINED IN THE PREVIOUS QUESTION.
FURTHER, IT IS
NARRATED THAT “THE LOAN THAT DRAWS
INTEREST IS RIBA”

19. PROHIBITION OF RIBA/INTEREST
"AND BECAUSE OF THEIR CHARGING RIBA WHILE THEY WERE
PROHIBITED FROM IT." [SURAH AN-
NISAA 4-161]

20. PROHIBITION OF RIBA/INTEREST(CONT..)
RIBA/INTEREST HAS BEEN ABOLISHED IN THE THIRD VERSE OF
SURAH ALI-'
IMRAN. THE PROHIBITION OF RIBA IS LAID DOWN IN THE
FOLLOWING WORDS

21. MONETRY POLICY
BY :
• M. ABUBAKAR
•BITF11M052

22. MONETARY POLICY
DEFINITION:
“MONETARY POLICY IS CONCERNED WITH DECIDING HOW MUCH MONEY THE ECONOMY SHOULD
HAVE OR PERHAPS MORE CORRECTLY DECIDING WHETHER TO INCREASES OR DECREASE THE
PURCHASING POWER OF MONEY.”
ACCORDING TO MACCONAL:
“CHANGING THE MONEY SUPPLY TO ASSIST THE ECONOMY
TO ACHIEVE A FULL EMPLOYMENT”

23. OBJECTIVE
OBJECTIVES ARE CLASSIFIED IN TWO ASPECTS :
• UNDER DEVELOPED COUNTRIES
• DEVELOPED COUNTRIES

24. UNDER DEVELOPED
COUNTRIES
• TO ACHIEVE FULL EMPLOYMENT
• TO HAVE HIGH EFFICIENCY
• TO HAVE LARGE SCALE OF RESOURCES MOBILIZATION
• TO INCREASE EXPORTS
• TO HAVE HIGH INVESTMENT
• TO PROVIDE PRICE AND EXCHANGE STABILITY
• TO HAVE EFFICIENT ALLOCATION AND UTILIZATION OF RESOURCES
• TO RAISE LIVING STANDARDS

25. DEVELOPED
COUNTRIES
• TO HAVE HIGH AGGREGATE DEMAND WITHOUT INFLATION
• ERADICATE INFLATIONARY AND DEFLATIONARY GAP
• HIGH RESEARCH/ FURTHER DEVELOPMENT
• PROVIDING ASSISTANCE TO OTHER COUNTRIES
• GAINING MONETARY CONTROL OVER OTHERS

26. TYPES OF MONETARY
POLICY
• CONTRACTIONARY / TIGHT MONETARY POLICY
“TIGHT MONETARY POLICY, ALSO CALLED CONTRACTIONARY MONETARY
POLICY, TENDS TO CURB INFLATION BY CONTRACTING/REDUCING THE MONEY
SUPPLY”
• EXPANSIONARY /EASY MONETARY POLICY
“EASY MONETARY POLICY, ALSO CALLED EXPANSIONARY MONETARY POLICY, TENDS
TO ENCOURAGE GROWTH BY EXPANDING THE MONEY SUPPLY

27. TOOLS OF MONETARY
POLICY
BY :
• ZAFAR IQBAL
• BITF11M024

28. TOOLS OF MONETARY
POLICY
QUANTITATIVE TOOLS
OPEN MARKET OPERATIONS
BANK RATE
CASH RESERVE REQUIREMENT
LIQUIDITY RATIO
QUALITATIVE TOOLS
CREDIT RATIONING
CREDIT CEILING
DIRECT ACTION
ADVERTISEMENT

29. TARGETS FOR MONETARY
POLICY:
• EMPLOYMENT, ECONOMIC GROWTH, AND INflATION CAN NOT
CONTROL DIRECTLY, IT MUST CHOOSE SETTINGS, OR TARGETS,
FOR VARIABLES THAT IT CAN CONTROL IN ORDER TO BEST
ACHIEVE ITS GOALS.
• IN PRACTICE, THERE ARE TWO TYPES OF TARGETS:
1. MONEY SUPPLY TARGETS.
2. INTEREST RATE TARGETS.

30. TARGETS FOR MONETARY
POLICY

31. TARGETS FOR MONETARY
POLICY

32. MONEY SUPPLY TARGETING

33. LIMITATIONS OF MONETARY
POLICY:
1) TIME LAGS
• TIME TAKEN IN – IMPLEMENTATION AND WORKING
• ‘INSIDE LAG’ OR PREPARATORY TIME
• ‘OUTSIDE LAG’ OR RESPONSE TIME
• IF THE TIME LAG ARE LONG, THE POLICY MAY BECOME INEFFECTIVE
• THE RESPONSE TIME LAG OF MONETARY POLICY ARE LONGER THAN FISCAL POLICY
2) PROBLEM IN FORECASTING
• ITS IMPORTANT TO FORECAST THE EFFECT OF MONETARY ACTIONS
• HOWEVER PREDICTION OF THE OUTCOME AND FORMULATION OF THE POLICY IS A DIFFICULT TASK
3) NON- BANKING FINANCIAL INTERMEDIARIES
HUGE SHARE IN FINANCIAL OPERATION REDUCES THE EFFECTIVENESS OF MONETARY POLICY
4) UNDERDEVELOPMENT OF MONEY AND CAPITAL MARKET
MARKETS ARE FRAGMENTED, UNORGANISED AND DOES WORK INDEPENDENTLY