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The past two decades after approval and implementation of The Interest Free Banking act provides a proper opportunity to examine and review its merits and flaws. A deep consideration shows that there are certain vacuums and flaws in the theoretical and practical dimensions of Iran’s non-interest banking. Effective steps could be taken with regard to restructuring the banking system by reforming and improving the aforesaid law. A fundamental question which has resulted in numerous theoretical and practical difficulties in banking area is an approach to replace the conventional interest based banking system by a complete non interest banking system. What was not taken into consideration in these process was the prohibition of interest based loan in Islam by which many real transactions such as salaf, tanzil, ijara, joalah, sherkat, mozarebah, mozareah, mosaqat and solh were approved; though they are quite different from each other in nature and do not fall in one financial category. It’s obvious that collecting various contracts with different rules and regulations under a single financial organization such as bank will lead to a sophisticated and ambiguous operation and an increase in the costs of control and supervision and inefficiency in the banking system. To solve this problem the paper suggests four types of banking namely as “Qard-uul-hasana (beneficence loan) banking”, “transactional banks with fixed profits”, “participatory banks with variable profits” and “comprehensive (all purpose) banks”. The characteristic of these banks with regard to their legitimacy, and low cost of operation and a higher applicability is expounded in this paper.