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Banking Exams Exam  >  Banking Exams Questions  >  Islamic banking is banking or banking activit... Start Learning for Free
Islamic banking is banking or banking activity that is consistent with the principles of
  • a)
    Debit law
  • b)
    Credit law
  • c)
    Sharia
  • d)
    Indian banking law
  • e)
    International banking law
Correct answer is option 'C'. Can you explain this answer?
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Islamic banking is banking or banking activity that is consistent with...
Islamic banking is banking or banking activity that is consistent with the principles of Sharia, which is the Islamic law. Sharia is derived from the Quran and the Hadith, which are the teachings and practices of the Prophet Muhammad. Islamic banking operates on the principles of fairness, justice, and ethical conduct, with an emphasis on avoiding interest (riba), uncertainty (gharar), and speculation (maysir).

Key principles of Islamic banking:

1. Prohibition of interest (riba): Islamic banking prohibits the charging or receiving of interest on loans or deposits. Instead, it focuses on profit and loss sharing arrangements, where both the bank and the customer share in the risks and rewards of the investment.

2. Prohibition of uncertainty (gharar): Islamic banking avoids transactions with excessive uncertainty or ambiguity. Contracts must be clear and transparent, and all parties must have a clear understanding of the terms and conditions.

3. Prohibition of speculation (maysir): Islamic banking discourages speculative activities, such as gambling or excessive risk-taking. Transactions should be based on real economic activities and tangible assets.

4. Ethical investments: Islamic banking encourages investments in socially responsible and ethical industries. Investments in activities that are considered harmful or forbidden in Islam, such as alcohol, gambling, or pork, are strictly prohibited.

5. Asset-backed financing: Islamic banking focuses on financing real assets and productive activities. Instead of lending money, Islamic banks often enter into partnerships with their customers, sharing in the profits and losses generated by the investment.

6. Islamic contracts: Islamic banking uses specific types of contracts to facilitate transactions. Some common contracts include Murabaha (cost plus financing), Musharaka (partnership), Mudaraba (investment partnership), and Ijarah (leasing).

7. Ethical screening: Islamic banks conduct ethical screening to ensure that investments and financing are in line with Sharia principles. This may involve assessing the social and environmental impact of investments and avoiding industries that are considered unethical.

Overall, Islamic banking aims to provide financial services that are in harmony with Islamic principles and values. It promotes ethical conduct, risk-sharing, and socially responsible investments, while avoiding interest-based transactions and speculative activities. By adhering to the principles of Sharia, Islamic banking seeks to create a just and equitable financial system that benefits both individuals and society as a whole.
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Islamic banking is banking or banking activity that is consistent with...
The correct answer is (C) Sharia. Islamic banking is banking or banking activity that is consistent with the principles of Sharia, which is the Islamic legal framework based on the teachings of the Quran and the Hadith (sayings and actions of Prophet Muhammad).
Islamic banking operates on the principles of Islamic finance, which prohibits the charging or receiving of interest (riba) and promotes ethical and socially responsible financial practices. Instead of traditional interest-based transactions, Islamic banking utilizes principles such as profit-sharing (Mudarabah), cost-plus financing (Murabaha), leasing (Ijarah), and partnership (Musharakah) to facilitate financial transactions.
The primary objective of Islamic banking is to conduct banking activities in a manner that aligns with Islamic principles, which include avoiding interest-based transactions, promoting risk-sharing, and ensuring ethical conduct in financial dealings. Islamic banking institutions adhere to specific guidelines and governance frameworks to ensure compliance with Sharia principles.
It is important to note that Islamic banking is primarily practiced in countries with a significant Muslim population, although it has also gained some recognition and adoption in non-Muslim-majority countries as an alternative banking system that offers ethical and Sharia-compliant financial services.
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Islamic banking is banking or banking activity that is consistent with the principles ofa)Debit lawb)Credit lawc)Shariad)Indian banking lawe)International banking lawCorrect answer is option 'C'. Can you explain this answer?
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