2. What is Bank ?
A Business that keeps and lends money
and provides other financial services,
Such as wealth.
3. "A Bank is a place
where they lend an umbrella in
fair weather and ask for it back
when it begins to rain"
-Robert Frost
4. THROWBACK
As history follows it wasn`t name as bank in
that time.
One view is that it is derived from an Italian
word ‘banque’ which means a ‘bench’.
The other point of view is that it has originated
from the German word ‘banc’ which means a
‘joint stock firm’.
5. WHAT IS COMMECIAL BANK?
Commercial bank accepts deposits
from individuals, firms and companies at a lower
rate of interest and gives it at higher rate of
interest to those who need them.
6. Primary Functions
Accepting Deposits
Accept various types of deposits from public
I. Current account
II. Saving account
III. Fixed/term deposit account
Advancing of Loans
Provide loans and advances of various forms
I. Cash Credit
II. Demand Loans
III. Short-term Loans
7. Secondary Functions
Special financial services
I. Currency exchange
II. Letters of credit
III. Money transfer
Agency functions
I. Collection of Checks
II. Collection of Dividends
III. Purchase or sale of Securities
IV. Execution of standing instructions
V. Acting as trustee or executors
9. ISLAMIC BANKING
Based on the principles of Islamic law
Prohibition of the collection and payment of
interest by lenders and investors
Shariah covers every aspect
of our life it provides
principles how to live at
individual level in the society
legal and economic system
10. FINANCIAL TERMS
Contract (Aqad)
Contract on Loan (Bai' al 'inah)
Profit Sharing (Mudharabah)
Safekeeping (Wadiah)
Joint Venture (Musharakah)
Cost Plus (Murabahah)
Leasing (Ijara)
Islam forbids lending out money at Interest, Islamic
rules on transactions known as Fiqh al-Muamalat
11. Fiqh al-Muamalat
Aqad
contracts business and marriage parties
Bai' al 'inah
sale and buy-back at a different price
Mudharabah
One gives money to another for investing
Wadiah
safekeeping, custody, deposit and trust
12. Musharakah
profit/loss sharing
Murabahah
a profit on the sale of goods
Ijarah
providing services and goods temporarily for
a wage
Fiqh al-Muamalat
13. ISLAMIC VS COMMERCIAL BANKING
Islamic bank Commercial bank
All the functions and operating
modes of are based on the
principles of Islamic Shariah
It shares risk between the
investor and the entrepreneur
Maximising profit but subject to
Sharia'h restrictions
The functions and operating modes
are based on fully manmade
principles
The investor and lender is
guaranteed of a predetermined rate
of interest or returns
Maximising profit without any
restrictions
14. Fundamental function is to
participate in partnership
business
It must be based on a Shariah
approved underlying
transaction
fundamental function is to lend
money and get it back with
compound interest
Interest-based commercial
banks don’t care about the
activities being performed with
their financing
Islamic bank Commercial bank
ISLAMIC VS COMMERCIAL BANKING
15. Central Bank
A central bank is a monopolized and often
nationalized institution given privileged
control over the production and distribution
of money and credit
17. Governed by the
government and work for
the economic development
Controls and regulates
the entire banking system
Acts as a state owned
institution.
Act as a banker to the
Government.
Profit motive banks, held by
government and private
sectors as well
Operates under the direct
control and supervision of
the central bank
Acts as a state or private
owned institution.
Acts as agents of the central
bank.
Central bank Other bank
Central Vs Other Banks
18. Does not deal directly with
the public. It issue guidelines
to commercial banks
Deals directly with the Public. It
serves the financial requirement
of the public
Issues currency and control
the supply of money in the
Market
Does not Issue currency, but
only adds to the approval of the
central bank
Central bank Other bank
Central Vs Other Banks