A new step has been taken by the Kerala government to create an Islamic bank. This bank will satisfy all Shariah rules. Recently the Kerala High Court has dismissed a petition which was filed by former Law Minister Subramanian Swamy. The petition said that an Islamic bank disobeys the principle of secularism as designed in India's constitution.

The court has approved the concept of Islamic non-banking finance company operations on Thursday.

Charging interest for loans has been prohibited by Shariah rules. Its main highlights are the sharing of profits and losses. As a result customers get a share of the overall profit rather than earning interest on deposits as stated by the bank.

For example, if Islamic bank buys the home for the account-holder. Later he pays the bank the home loan in installments. If ever he fails to give the installment there are no penalties for late payments.

Two years ago, the LDF government in Kerala first floated the proposal for an Islamic bank. The state's Finance Minister, Dr TM Thomas Issac has stated that, this bank is known as an Islamic bank however it is not a holy institution.