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As India's Economy Cools, the Spotlight Hits Its Shadow Banks

Jun 13, 2019 | 09:45 GMT
Shivkumar Mani, the head of marketing for the Dewan Housing Finance Corp., an Indian shadow bank, is seen in this photo.

Shivkumar Mani, the head of marketing for the Dewan Housing Finance Corp., an Indian shadow bank, is seen in this photo. India's shadow banks are experiencing increasing problems.

(SHRIYA PATIL/The India Today Group/Getty Images)

As growth in India's $2.6 trillion economy cools, the problems afflicting its shadow banking sector are increasingly coming to light. Shadow banks -- also known as non-banking financial companies -- are facing a cash crunch ever since a titan in the sector, Infrastructure Leasing & Financial Services, defaulted on its payments in September 2018. That event sparked fears of a contagion rippling through India's already sluggish corporate credit system. This has left the banks and mutual funds from which shadow banks source most of their capital more reluctant to fund them. For the Reserve Bank of India, managing the shadow banking crisis will be one of its core challenges in the months ahead....

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