The figures assume significance as Indian shadow banking's rapid growth and reliance on short-term funding sources bubbled over in 2018, most evident by the default of IL&FS last year.
The reports pointed out that India's shadow banking assets were fairly small by international standards, ranking 17th globally at $571.7 billion as of YE17, according to the Financial Stability Board's (FSB).
"Despite these modest indicators, the Indian shadow banking system has grown rapidly over the last decade, with a particular spike in 2017 driven by finance companies providing asset finance and home loans and funds investing in infrastructure loans," Fitch said.
"Non-bank growth has been fuelled by accommodative funding markets following demonetisation, which saw liquidity flow to money market funds and banks, while many Indian public-sector banks were capital-constrained due to their own asset quality issues," it added.
The reports further explained that the prolonged rapid growth across the sector brings into focus the relative vulnerability of non-bank financial institutions' business models, particularly related to risk management and funding and liquidity.
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