LLOYDS TSB has launched an Islamic current account to help cater for the banking needs of the UK's 2m Muslims.

It is the first step towards offering a dedicated range of Islamic financial services to Muslims who until now have used conventional current accounts or opted out of traditional banking services altogether, the bank said.

The Government has been concerned ethnic minorities have been excluded from financial services because of a lack of suitable products. The Treasury said ethnic minorities are among the key groups of people it hopes its new Financial Inclusion Fund will help.

Under the Lloyds account, no credit interest will be charged and the account will have no overdraft facility, but it will provide a debit card and unlike some other compliant accounts, will not charge a fee or require a minimum balance.

The funds held by Lloyds TSB on all Islamic current accounts will also be held in accordance with Islamic law.

The account is being piloted in selected branches across the UK, including London's Edgware Road, as well as branches in Birmingham and Luton.

Gordon Rankin, current accounts director, Lloyds TSB, said: 'The Muslim community is one of the fastest growing in the UK and is very much part of the fabric of British life.

'However, until now their banking needs have been largely uncatered for and many British Muslims have often had to bank in a way that is against their principles.'

The company said its own research showed 75% of British Muslims wanted banking services that fitted with their faith.

In order to ensure the current account is fully compliant with Islamic law, Lloyds TSB has consulted a board of Islamic scholars, who have advised on all aspects of Islamic finance law.