Nowadays, banking is no longer limited to support business or commercial duties. It also has a social obligation towards society. The current banking system widens the gap between the rich and the poor, which leads to social tension, instability, and other economic problems. Islamic banking is fast emerging as an alternative to interest-based conventional banking. It has registered exponential growth in the last two decades. The recent global financial crisis and its impact on conventional banking, has further given impetus to the concept of Islamic banking. India, with a Muslim population of over 180 million, is the second-largest Muslim population in the world. It remains an unexplored and a big market for Islamic Banking system. This paper explores the basic principles and concepts in Islamic Banking and reviews the potential of Islamic Banking in India. The paper highlights the financing modes of Islamic Banking and presents the major issues and constraints of Islamic Banking. Islamic banking has unfortunately been misunderstood in India as a religious, charitable venture restricted to the country's poverty-ridden and economically downtrodden Muslim community. Even years of successful Islamic banking operations and its phenomenal growth around the world have failed to demolish this myth. This study is an attempt to understand the awareness and attitude of Indians towards Islamic banking. For this purpose, a representative sample of the population is chosen and surveyed with the help of a structured questionnaire developed for this purpose. Islamic banking is the rapid growth of Islamic banking has attracted much attention lately in the economic literature. This paper will illustrate the historical development of the Islamic banking industry. Besides, it will provide information about Islamic banking development in many countries around the world.