islamic and indian banking system presentation

8/7/2019 islamic and indian banking system presentation

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FINANCIAL

MANAGEMENT


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ISLAMIC BANKING SYSTEM


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What is Islamic Banking

refers to a system of banking or banking activity that isconsistent with the principles of the Shari'ah (Islamic

rulings) and its practical application

Principles emphasise moral and ethical values in all

dealings, have wide universal appeal

The principle source of the Shariah is The Quran followedby the recorded sayings and actions of Prophet

Muhammad


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ORIGIN

Islamic bank can be traced back to the very birth of Islamwhen the Prophet himself acted as an agent for his wife's

trading operations

In 1963, in Mit Ghamr, in Egypt, the first Islamicinterest-free bank came into being

The following types of accounts were accepted:

a) Savings accountsb) Investment accounts

c) Zakat accounts


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BASIS OF ISLAMIC BANKING

the banking system has to avoid interest

Another Islamic principle is that there should be no reward

without risk-bearing

Consider two persons, one of whom has capital but no special

skills in business, while the other has managerial skills but

possesses no capital. They can co-operate in either of two

ways

1. Debt-financing (the western loan system)

2. Mudarabah


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Mudarabah is the basis of modern Islamic banking

on a two-tier basis

1st tier: The depositors put their money into the

bank's investment account and agree to share

profits with it

2nd tier: Entrepreneurs seek finance from the

bank for their businesses on the condition that

profits accruing from their business will be shared

between them and the bank in a mutually agreed

proportion, but that any loss will be borne by the

bank only


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STATUS OFISLAMIC BANKING

Islamic banking is no longer a novel experiment

Islamic banks are evolving financial and investment

instruments that are not only profitable but are also ethically

motivated


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INDIAN BANKING SYSTEM


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History of Banking in India

Can be divided into 3 phases

PHASE-1

The General Bank of India was set up in the year 1786

In 1865 Allahabad Bank was established and first time

exclusively by Indians

During the first phase the growth was very slow and banks

public has lesser confidence in the banks


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Phase-II

Government took major steps in this Indian Banking Sector

Reforms after independence

Seven banks forming subsidiary of State Bank of India was

nationalised in 1960

14 major commercial banks in the country was nationalised

This step brought 80% of the banking segment in India under

Government ownership


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Phase III

This phase has introduced many more products and facilitiesin the banking sector

The country is flooded with foreign banks and their ATM

stations

Phone banking and net banking is introduced


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Financial Structure

The Indian financial system comprises

the following institutions

1. COMMERCIAL BANKS

a) Public sector

b) Private sector

c) Foreign banks

2. DEVELOPED BANKS

to be continued..


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3. CO-OPERATIVE BANK

a) Primary Credit Societiesb) Central Co-operative Banks

c) State Co-operative Banks

4. SPECIALISED BANKSa) Export Import Bank of India

b) Small Industries Development Bank of Indiac) National Bank for Agricultural and Rural Development

to be continued.


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5. RESERVE BANK OF INDIA

established in April 1935 with a share capital of Rs. 5 crores

nationalised in the year 1949

superintendence and direction of the Bank is entrusted toCentral Board of Directors of 20 members

The Reserve Bank of India Act, 1934 was commenced onApril 1, 1935.The Act, 1934 (II of 1934) provides the

statutory basis of the functioning of the Bank


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Functions of Reserve Bank of India

1. Bank of Issue

2. Banker to Government

3. Bankers' Bank and Lender of the Last Resort

4. Controller of Credit

5. Custodian of Foreign Reserves

6. Supervisory functions


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THANK YOU

islamic and indian banking system presentation

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