Although India is the third-largest Muslim country globally, it has yet to fully adopt Islamic Banking. The purpose of this study is to evaluate the potential of Islamic banking in India and identify the obstacles that must be overcome to achieve success. The study will commence with a brief summary of the current state of Islamic Banking in India, its prospective effects on the Indian economy, and the challenges that it poses. Despite the growth of the Indian economy, there has been an increase in poverty levels. The government aims to establish a fair and just society, but several citizens necessitate additional financial aid. The current banking system does not cater to everyone. Islamic banking, based on Shariah law and without interest, has emerged in many parts of the world. This system focuses on real assets and sharing risks between lender and borrower through various methods such as partnerships, joint ownership, leasing, and sales. Unlike conventional banking, where money is considered a commodity, Islamic banking views money as a means of exchange. It holds the potential to aid vulnerable groups like farmers and small to medium enterprises, promoting inclusive economic growth. This paper presents suggestions for the future development of Islamic Banking.