More NBFCs will have to die if India's shadow-banking sector is to survive

A few quarters of pain in sectors that depend upon shadow financing is a small price to pay to produce a sector that winds up doing its job efficiently and sustainably

The slowdown that began among India's shadow banks is spreading. Sectors that had come to depend on credit from what in India are called non-banking financial companies (NBFCs) are posting awful numbers. Insurance is slowing and real estate is troubled. The automobile sector -- which contributes half of India's manufacturing output -- is shrinking as stressed shadow banks prioritise survival above lending growth.

Naturally, Prime Minister Narendra Modi's government is worried. But it, and the Reserve Bank of India, should avoid any attempt to succor the shadow-banking sector with liquidity. Giving NBFCs the false appearance of health would only increase,