Abstract
Islamic Economic system has its unique features and characteristics, and in the modern era Islamic banking, is gaining more and more attention of people throughout the world in general and in Pakistan in particular owing to its usefulness. There has been a time when Islamic banking was just a dream, but today Muslim scholars have, after long deliberations, succeeded in their efforts to present a workable framework for it. Although they have recommended that Islamic banking should be based on Musharakah and Mudharabah transactions as these are the ideal modes, people in Pakistan are inclined towards Murabaha instead. Although Murabaha transaction is a simple form of sale and purchase, however, when it takes the shape of transaction in banking sector it becomes a combination of several other transactions. The State Bank of Pakistan has specified a corner for Islamic banking, the details of which are available on its website. This paper will focus on a critical analysis of the documents and rules and regulations of Murabaha transaction presented by the State Bank of Pakistan and present suggestions to make it in consonance with the teachings of Islam.