What is Tawarruq? Is it allowed? Actually some of the Islamic Banks are following this methodology for offering the loans to their customers. For example, if somebody needs a certain amount so the bank is asking to them to purchase the metal, other than gold, on installment. Of course with the profit to the bank. Then they are facilitating the customer to sell that metal with minor commission. Thus finally giving him the amount that he asked. In whole the process, the customer is not getting the physical possession of the metal, but in documentation all this processing is going on and this whole processing is taking 2 days (i.e. applying for loan to getting money in the account). So, please advice whether it is Halaal.

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.

Tawarruq is defined in the terminology of the scholars as buying goods with a delayed payment and then selling it to other than the seller [from whom one bought the goods] in order to obtain cash money. This method is permissible according to the majority of scholars but they differed somehow as regards its name. For this sale to be acceptable, the buyer should fully possess the goods before selling them for the second time, and the second sale should be separate from the first sale. Furthermore, one should not sell the goods to the person from whom one bought them in principle if the cost of the goods is lesser than the price he bought them from him. These conditions are based on evidence. 'Abdullaah Ibn 'Umar narrated that the Prophet prohibited selling the goods unless one has fully taken possession of it beforehand. [Abu Daawood]. The Prophet said: "It is prohibited to give a loan with a condition that the debtor buys goods from the lender; two conditions in one sale (like having two prices one in cash payment and another in the delayed payment) are also prohibited, and one is not permitted to benefit from any goods unless it becomes fully in his possession and he can guarantee, and one is not permitted to sell what he does not own." [At-Tirmithi] Imaam Muslim also reported that the Prophet forbade selling food grain until it fully becomes in one's possession. 

Selling goods with a lesser price than the price one bought them with instalments to the same seller is a kind "Eenah" (this is when one sells a certain goods to someone else for a certain price and for a certain period of time (in instalments), then, before the buyer pays back the whole price, the seller buys back the goods for a lesser price in cash- thus combining two sales within one). Therefore, the way the transaction is done according to what you mentioned in the question is forbidden as the seller [who wants to get some cash money] has not fully taken possession of the goods.

Allaah Knows best.