ASSESSMENTS

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)

Highlights

  • Managing the shadow banking crisis will form one of the Reserve Bank of India's core challenges in the months ahead.
  • The central bank will balance its efforts at pumping cash into the economy with keeping a lid on inflation.
  • Avoiding a crisis in shadow banks will be key toward sustaining consumption amid an economic slowdown.

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....

Keep Reading

Register to read three free articles

Proceed to sign up

Register Now

Already have an account?

Sign In