RBI-led review could be a painkiller for liquidity-starved shadow banks

The pain is clear in both funding costs and share prices: a handful of shadow banks have lost between 40 per cent and 90 per cent of their market capitalisation over the past year

Sunlight can be a helpful disinfectant. India’s shadow banks have grown rapidly in recent years, extending loans for the purchase of everything from a house to a car or a laptop. Yet almost one year on from the default of a major alternative lender, Infrastructure Leasing & Financial Services (IL&FS), many others are still struggling to secure funds. The default on a payment by Altico Capital to a Dubai-based lender on Thursday highlights the stress.

A central bank led-review could restore confidence in the quality of their assets and help reverse India’s sharp consumption-led slowdown.

Non-bank institutions depend on external funding, instead