Hey guys, have you ever heard the name of Islamic Bank ? let us know about Islamic Bank in this post today. What is Islamic Bank and how does it work 

What is Islamic Bank ?

It is a bank formed in accordance with the law of Sharia, which neither gives interest on deposit of its customers nor take interest on any loan given to customers. In Islam is forbidden to pay interest on money because the interest system is considered as haram ('' हराम '') in it. The Islamic bank gives loan on the basis of good behaviour and the borrower has to return only the principal amount. That is, interest is not taken on the loan.

In Islamic banking, the bank plays the role of trustee of funds. People deposit money in the bank and can withdraw it whenever they want. Here interest is not allowed on the saving a/c but when the bank gets some benefit by your money, then it gives some part of this benefit to the account holder's as a gift.

How Islamic Bank works ?

If the Islamic bank does not pay interest or accept from the customers, then how does this bank run, where its employees get the salary and how other expenses are met ? Islamic banks primarily buy fixed assets such as house, shop, land etc. In the Islamic mortgage transaction, the bank does not give loan to its customer for buy any goods rather the bank buys those goods from the seller itself and sell it to the buyer with profit. For this, the bank asks the buyer to make payments in EMIs. The profit from the investment in the bank are divided among the customers and other expenses of the bank are met. Also, it is worth noting that if the bank has a deficit, then the customer also has to suffer losses.

Apart from this, Islamic bank is not allowed to invest in illegal business such as alcohol, gambling etc.

For example :-

If someone applies for a loan to the Islamic bank to buy a home, then instead of paying a loan to them rather bank purchase a home and sell them. Suppose the present value of the home is rupees 30 lakh, so the bank makes EMIs in such way that in 10 to 15 yrs. Bank gets rupees 35 to 40 lakh from customers.