India’s Shadow Banking Crisis is Intensifying

By Kavaljit Singh | Briefing Paper # 27 | August 28, 2019

The ongoing liquidity crisis in India’s shadow banking sector is intensifying. The troubles that started with defaults by Infrastructure Leasing & Financial Services Limited (IL&FS) last year are far from over as the sector continues to face a severe liquidity crisis. If tight liquidity conditions persist over the next three quarters, it may turn into a solvency issue for several shadow banks.

After the IL&FS collapse, the entire sector is facing a crisis of confidence as investors are shying away from investing in securities issued by shadow banks. Several shadow…

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Crisis gives India the Chance to Clean Up its Shadow Banking Sector

By Kavaljit Singh | Letter (FT) | July 5, 2019

Further to your report “India’s shadow banking crisis sparks credit crunch” (, July 3): even more worrisome is the danger of the ongoing liquidity squeeze in the shadow banking sector turning into a more serious solvency issue. Several liquidity-starved shadow banks have already initiated the sale of loan portfolios and assets to meet repayment obligations.

As shadow banks are the largest net borrowers of funds from the financial system with a substantial part of funding coming from banks, mutual funds and insurance companies, the failure of a large shadow bank…

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India’s Shadow Banking System is Facing an Imminent Crisis

By Kavaljit Singh | Briefing Paper # 26 | June 14, 2019

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…

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The EU’s Proposal for WTO Modernisation: A Critical Assessment

By Biswajit Dhar | Briefing Paper # 25 | June 12, 2019

In June 2018, the Council of the European Union gave the European Commission a mandate “to pursue WTO modernisation in pursuit of the objectives of making the WTO more relevant and adaptive to a changing world, and strengthening the WTO’s effectiveness”. A few months later, a group of 13 countries, which also included the EU, unveiled a process for WTO reform for “developing 21st century trade rules at the WTO”.

Couched under these broad-brush objectives lay the intent to alter the focus of the WTO fundamentally, to make the multilateral…

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Recent Experiences with Capital Controls

By Kavaljit Singh | Policy Brief # 4 | May 2, 2019

It is difficult to make any generalization on the countries’ experiences as significant heterogeneity exists across countries in terms of type, nature, sequencing, and intensity of capital controls. However, some notable trends are visible. For instance, over the last three decades, there has been a marked shift regarding preference over the types of capital controls, from the earlier quantitative restrictions to price-based controls. The growing preference for using price-based mechanisms is largely in tune with a market-based approach to financial regulation.

Further, a significant number of capital controls are associated…

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