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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Capital Controls: The Policy Pendulum Just Keeps Swinging

By Kavaljit Singh | Policy Brief # 3 | April 5, 2019

Contrary to popular perception, both the developed and the developing countries have extensively used a variety of capital controls to restrict and regulate the cross-border movement of capital. Although the types of capital controls and their implementation varied from country to country, it would be difficult to find any country in the world that had not used these at some point or the other.

Modern capital controls in the form of taxes on the purchase of foreign assets came into existence in World War I as governments introduced special taxes…

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