jaggadaku Posted February 3, 2011 Posted February 3, 2011 The secular republic of India is all set to have its first Islamic bank. The Kerala High Court on Thursday dismissed petitions challenging the Kerala government's decision to establish India's first Islamic Bank which will work on the principles of Shariah. The order came from a Division Bench comprising Chief Justice J Chalameswar and Justice P R Ramachandra Menon, which rejected petitions filed by Janata Party President Subramaniam Swamy and another. The petitioners contended that the state establishing a bank which will work on the principles of a religion will violate the principle of secularism enshrined in the Constitution. However, the court did not agree. Reacting to the HC verdict, Swamy said he will consider appealing to the Supreme Court after going through the full text. ``I will challenge the same if it was dismissed on merits,'' he said. The state had first floated the idea of establishing the bank under an entity registered as Al-Baraka Financial Services way back in December 2009. The bank was also to have a body of Islamic scholars to advise whether the principles of shariah were being complied with. But in January 2010, the HC stayed the government's plans and issued notices to the RBI, Finance Ministry and Kerala State Industries Development Corporation (KSIDC) which was to hold 11 percent equity in Al-Baraka. The RBI replied that the current laws did not permit such a bank. With its plans running into rough weather, the state government too lost hope and even told the state assembly that its plan was not to establish an Islamic bank, but only a financial institution that would work on the interest-free principle. http://timesofindia.indiatimes.com/india/Kerala-High-Court-clears-way-for-Indias-first-Islamic-bank/articleshow/7417686.cms
Mariyam Posted February 3, 2011 Posted February 3, 2011 I've never understood what Islamic banking really is. In spite of reading a few articles on Wiki and on the internet.Many years ago in a boring seminar that I attended, a maulvi saheb was explaining the benefits of the Islamic banking system. But he was more being more rhetorical than factual. He couldn't do a decent job. I have a few question, which I hope the in house experts on Islam and Finance can answer. 1) What exactly is the meaning of interest free banking? 2) If the bank doesn't charge interest on loans then how does it earn? How does it sustain itself? And if such banks are allowed, wouldn't everyone want a loan from such a bank? 3) If the bank doesn't offer interest on savings, what does the customer get by keeping savings in such a bank? 4) How is an Islamic bank different from a private bank, say HDFC bank? 5) Does the establishment of such a bank contravene any article of the Indian constitution? (This I may be able to look up and find out) 6) Is Coca Cola better than Pepsi? As you can gather form my questions, I'm no expert on finance. So please explain in layman terms. Thank you in advance.
punjabi_khota Posted February 3, 2011 Posted February 3, 2011 Pretty ironic that interest is haraam according to Islam, considering that the Pathans are considered to be worst loan sharks ..:hahaha:
Mariyam Posted February 3, 2011 Posted February 3, 2011 Pretty ironic that interest is haraam according to Islam' date=' considering that the Pathans are considered to be worst loan sharks ..:hahaha:[/quote'] I think you got that slightly wrong. They are considered to be effective recovery agents. :P But thats digressing from the topic. This thread is about Islamic banking.
b555 Posted February 3, 2011 Posted February 3, 2011 never stress on posts being strictly related to OP here :D
Clarke Posted February 3, 2011 Posted February 3, 2011 What happens if somebody defaults on the loan and goes bankrupt ? Do they pay back in terms of an arm/leg/something else :nervous:
Desi Cartman Posted February 3, 2011 Posted February 3, 2011 CAn I borrow 300 billion dollars please . Thanks
yoda Posted February 3, 2011 Posted February 3, 2011 CAn I borrow 300 billion dollars please . Thanks BTW, the way Shariah banks work is, let's say you want to buy a 300 billion dollar mansion, they will it buy it for you at 300 billion and sell it to you for 330 billion (no interest ofc) and keep the mansion as collateral till you pay the 330 billion loan. :giggle: And then, they will send part of the 30 billion profit to the PoK to help their friends out. :winky:
Sir_Afridi Posted February 4, 2011 Posted February 4, 2011 People here have no idea how the Islamic banking system works. I am surprised that India did not had a Islamic bank despite having a big Muslim population.
The Outsider Posted February 4, 2011 Posted February 4, 2011 I've never understood what Islamic banking really is. In spite of reading a few articles on Wiki and on the internet.Many years ago in a boring seminar that I attended, a maulvi saheb was explaining the benefits of the Islamic banking system. But he was more being more rhetorical than factual. He couldn't do a decent job. I have a few question, which I hope the in house experts on Islam and Finance can answer. 1) What exactly is the meaning of interest free banking? 2) If the bank doesn't charge interest on loans then how does it earn? How does it sustain itself? And if such banks are allowed, wouldn't everyone want a loan from such a bank? 3) If the bank doesn't offer interest on savings, what does the customer get by keeping savings in such a bank? 4) How is an Islamic bank different from a private bank, say HDFC bank? 5) Does the establishment of such a bank contravene any article of the Indian constitution? (This I may be able to look up and find out) 6) Is Coca Cola better than Pepsi? As you can gather form my questions, I'm no expert on finance. So please explain in layman terms. Thank you in advance. From what I know, it's a profit sharing arrangement instead of an interest payment. For example, if you deposit some amount into an Islamic bank, they in turn will invest the money into ventures permissible by Islam and pay you the scaled profit instead of some fixed interest rate of say 5%. Your return could be 3% or 7% depending on how the investments of the bank turned out. If you are taking a loan from the bank, the bank will charge you on the basis of the profit you make instead of a fixed interest rate. They would also take some collateral so that you don't just run away from the money. At the end of the day, it's up to the individual where he is going to put the money.
Desi Cartman Posted February 4, 2011 Posted February 4, 2011 I dont see any harm as long as its not a Govt of India undertaking.
Mariyam Posted February 4, 2011 Posted February 4, 2011 From what I know, it's a profit sharing arrangement instead of an interest payment. For example, if you deposit some amount into an Islamic bank, they in turn will invest the money into ventures permissible by Islam and pay you the scaled profit instead of some fixed interest rate of say 5%. Your return could be 3% or 7% depending on how the investments of the bank turned out. If you are taking a loan from the bank, the bank will charge you on the basis of the profit you make instead of a fixed interest rate. They would also take some collateral so that you don't just run away from the money. At the end of the day, it's up to the individual where he is going to put the money. I didn't quite follow the part in bold. What if I am not making any profit? What if the loan I took is an auto loan? Whenever I sell the car, the value is only going to depreciate. The bank just charges a fixed amount greater than what the actual amount is?
punjabi_khota Posted February 5, 2011 Posted February 5, 2011 I think the original Islamic banking from 700 AD states the following " In case of a camel (read auto) loan, since there is no profit being made on the loan, the following shall apply: The borrower (and proud owner of a spanking new camel) shall be obliged to give two (2) rides from the bank to the local market, to a bank staff member every week."
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