This research studies the barriers to the adoption of interest-free banking products in Karnataka and analyzes how these issues impact the financial inclusion. However, interest-free banking is highly associated with inclusive and ethical financial principles, which has a latent to fascinate underserved populations, and its recognition remains inadequate. The research determines the major barriers like misunderstanding about the functioning and nature of such products, regulatory uncertainties, consumers' low awareness, and insufficient availability in financial institutions. Lack of trust and cultural perceptions in non-conventional banking models are highly denoted to the slow adoption. By using integration of primary data and the secondary sources and surveys, the study addresses how these issues are disproportionately affect financially excluded groups like rural populations and small entrepreneurs. The study results recommend encouraging transparent communication, strengthening institutional support, and enhancing financial literacy can substantially improve the acceptance of the consumer. The research highlighting these barriers is not only essential for developing the reach of interest-free banking, but also for improving the broader financial inclusion goals in Karnataka.