The Islamic law prohibits interest on both loans and deposits, as both profit and risk are shared together by the borrower and the lender.
As a result, the depositor, who does not bear risk in other banking systems has to equally share the risk with the bank in Islamic banking. Owner of the capital, however, is allowed to have a share in the surplus.
India has no banks that operate on shirkah and muzarabah that are the basic Islamic principles. The Daurl Ifta Deoband has even issued a fatwa against “normal and routine” banking schemes that do not subscribe to Islamic norms.
There are, meanwhile, a few non-banking cooperatives like Al Ameen Islamic Financial and Investment Corporation Ltd. in Karnataka and Mumbai-based Al-Barr Finance House Limited, which have branches in some cities, including Aligarh. There are also some popular investment companies that claim to invest money as per the Islamic laws.
A three-member committee has been set up under the chairmanship of Dr Mohammed Nejatullah Siddiqi, a retired Aligarh Muslim University, professor of economics and Islamic studies to work out the modalities of the course on Islamic banking.