The State of Islamic Finance in India: Strengths and Weaknesses

India’s contribution in the field of Islamic economics is well recognized. In fact there are many who believe that the concept of Islamic economics evolved during Indian Muslims’ struggle for independence from British rule. Several writers of Indian origin have made well-established theoretical contributions in the filed of Islamic economics. However, one important aspect that appears to have hitherto been ignored is India’s contribution towards the practical development of Islamic banking and finance. The aim of this article is to analyse the current state of Islamic finance in India. During early 1990s the government of India threw open the financial sector for private players. Taking this chance many opportunistic people entered the arena in the name of Islamic finance and ultimately vitiated the whole environment leading to the crisis of confidence. This brought closure to some of the most promising Islamic financial institutions in the country. The future of Islamic finance, as a result, does not at the moment look very bright.