Growth of Islamic banking in India: discriminant analysis approach

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Islamic finance presents a new avenue as a novel alternative to the conventional financial set-up in this country. The purpose of this study is to find out the prospects of Islamic banking in India. The objectives of this study have been met by conducting a survey to elicit the responses from retail customers of both private and public sector banks in four cities of South India. The survey was carried out among both Muslims and non-Muslims to find out about the awareness levels, patronage, motivation and perception towards Islamic banking in India. The results reveal that the respondents have a favorable perception towards Islamic banking, especially from the city of Hyderabad, since it has got a lot of institutions that run courses on Islamic banking.
In the current study, it is found that Islamic banking is having low level of awareness among the respondents. However, the attitude towards adoption of Islamic Banking seems encouraging, as reflected in the study. The findings of this research gain significance due to the fact that this sample represents a segment of the entire population of South India and thus, acts as a pre-cursor to a detailed study involving various other such demographic denominations. The future directions for this research could be carried out by drawing such clusters across the rest of the country. This may help to understand and get a better and broader perspective of the need for Islamic banking and hence, its prospects in India.

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    • Table 1. Model summary
    • Table 2. ANOVA
    • Table 3. Coefficients (a)
    • Table 4. KMO and Bartlett’s test for products and services, ease of access and attractiveness as patronage factors in Islamic bank selection criteria
    • Table 5. Communalities for service quality, ease of access and attractiveness as patronage factors in Islamic bank selection criteria
    • Table 6. Total variance explained for service quality, ease of access and attractiveness as patronage factors in Islamic bank selection criteria
    • Table 7. Rotated component matrix (a) for service quality, ease of access and attractiveness as patronage factors in Islamic bank selection criteria
    • Table 8. Discriminant analysis of different dimensions with respect to prospects of Islamic banking in India
    • Table 9. Box’s test of equality of covariance matrices along with log determinants
    • Table 10. Eigenvalues
    • Table 11. Wilks’ lambda
    • Table 12. Standardized canonical discriminant function coefficients
    • Table 13. Structure matrix
    • Table 14. Canonical discriminant function coefficients
    • Table 15. Functions at group centroids
    • Table 16. Classification of different dimensions with respect to religion
    • Table 17. Classification results (a)