India’s Shadow Banking System is Facing an Imminent Crisis

India’s shadow banking system is in deep trouble. An imminent crisis has been slowly but surely brewing in India’s shadow banking sector for the past one year. The first signs of trouble in this sector emerged in June 2018 when Infrastructure Leasing and Financial Services (IL&FS) – a major non-banking financial company – defaulted in payment obligations on inter-corporate deposits and commercial papers worth Rs 4.5 billion.
Thereafter, a string of defaults by IL&FS group’s subsidiaries on bank loans, short-term deposits, and commercial papers during July-September sparked turbulence…