Islanding detection is an important operational aspect of microgrids. Early detection of islanding is essential to avoid unsynchronised reclosing. The possibility for minimal or near zero power mismatch between generation and load of a microgrid is high in a modern reconfigurable distribution network. Hence, at the instant of islanding, the voltage at the Point of Interconnection (PoI) will not change significantly and may lead to failure of over/under voltage and frequency relays in detecting islanding. In this work, a second harmonic impedance drift-based islanding detection method is proposed. The second harmonic voltage at PoI of a voltage source inverter-based distributed generation (DG) is extracted through a sliding window discrete Fourier transform, and is used for generating a second harmonic current reference through virtual admittance. The second harmonic impedance at the DG terminal is estimated. This second harmonic impedance remains insignificant in the case of grid-connected mode but drifts beyond a threshold in islanding mode. The proposed method is validated on two test cases, and the comparative results from simulation studies indicate that the islanding detection is achieved in less time with minimal effect on the power quality, fundamental voltage, and frequency at the PoI.