SHADOW BANKING IN INDIA: NATURE, TRENDS, CONCERNS AND POLICY INTERVENTIONS

Sashi Sivramkrishna (), Soyra Gune (), Kasturi Kandalam () and Advait Moharir ()
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Sashi Sivramkrishna: Kautilya Entrepreneurship & Management Institute, Bengaluru, Director, Foundation to Aid Industrial Recovery, Bengaluru, India
Soyra Gune: Foundation to Aid Industrial Recovery, Bengaluru, India
Kasturi Kandalam: Foundation to Aid Industrial Recovery, Bengaluru, India
Advait Moharir: Foundation to Aid Industrial Recovery, Bengaluru, India

Review of Economic and Business Studies, 2019, issue 24, 29-46

Abstract: While the origin of shadow banks may be traced to the 1970s, developing countries have witnessed a massive growth of shadow banks in more recent decades. India too has seen a similar growth in shadow banks; however, the recent 2018 collapse of IL&FS Group, a major shadow bank, disrupted the credit cycle, stalled investment and even affected overall GDP growth. With experts warning that shadow banks are susceptible to systemic risks and crisis, it becomes imperative to understand the shadow banking system better. In this paper, we use exploratory data analysis – both quantitative and qualitative – to draw attention to the need for definitional clarity in the concept of shadow banks and how they operate. Trends in Indian shadow banking are discussed using data drawn from secondary sources. Systemic risks in India’s shadow banking sector are identified and policy interventions are discussed. The study is imperative for highlighting the importance of shadow banking in India, its growth and the evolving policy interventions regulating this important component of the financial system.

Keywords: shadow banks; non-banking financial companies; mutual funds; commercial paper; financial regulation; financial crisis. (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Date: 2019
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