United Nation Development Project (UNDP)'s Human Development Report 2019 shows the top 1% of the economic elite of the rich and poor countries, made huge gains over 1980-2016. As result, the top 1% alone received 27% of income growth over the period, compared with 12% received by the bottom 50%. There has been a universal concern on wealth and income distribution. The income gap between the rich and poor is staggering and will get worse with every global crisis that tends to come every ten odd years like the COVID-19 pandemic currently hitting the globe. The objectives of the study are (1) To evaluate the impact of Islamic banking development on Income Inequality. (2) To compare the impact of Islamic and conventional banking development towards income inequality.In doing so, a panel data analysis is conducted by taking the data of seven OIC countries from the period of 2001 to 2015. The main variables in consideration are income inequality based on Gini coefficient produced by Estimated Household Income Inequality (EHII) of University of Texas Inequality Project (UTIP) and banking development (both Islamic and conventional) represented by total banking asset. While the controlled variables are economic growth as measured by real Gross Domestic Product per capita (RGDPC) and inflation as measured by Consumer Price Index (CPI). Robustness test is done by substituting total banking deposit as a measure of banking development. A total of 8 regression models are designed consisting of Pooled OLS, Random Effect and Fixed Effect estimators. The estimated findings suggest that both Islamic banking development and conventional banking development have a positive relationship towards income inequality.