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2022 | OriginalPaper | Buchkapitel

Shadow Banking and Non-banking Financial Companies in India: An Overview

verfasst von : Sankarshan Basu, Jaslene Bawa

Erschienen in: Revisiting the Indian Financial Sector

Verlag: Springer Nature Singapore

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Abstract

Shadow banking as a phenomenon has been around for about two decades and has made its presence felt in the Indian markets as well. This article looks at shadow banking in the Indian financial markets context. It also considers the role that Non-Banking Finance Companies play in the Indian markets as a complimentary lending mechanism to banks and highlight some of the challenges and issues that have been generated due to it. The article also highlights some of the recent problems in this sector in the Indian market and suggests some potential solutions.

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Fußnoten
1
Weekly Statistical Supplement—All Scheduled Commercial Banks—Business in India and Quarterly statistics on Deposits and Credits of Scheduled Commercial Banks, Reserve Bank of India (RBI).
 
3
Federal Reserve Bank of Atlanta, Shadow Banking Interview of Paul McCulley, available on the Internet at, https://​www.​frbatlanta.​org/​news/​conferences-and-events/​conferences/​2012/​120409-fmc/​media/​mcculley-interview.​aspx, accessed on September 9, 2020.
 
4
Systemic risk is defined as a risk event that pressurizes the financial systems’ stability or threatens the public confidence in the system.
 
5
Securities Exchange Commission (SEC) Web site, Reserve Primary Fund Distributes Assets to Investors, Jan 29, 2010, available on the Internet at, https://​www.​sec.​gov/​news/​press/​2010/​2010-16.​htm, accessed on Sep 20, 2020.
 
6
By definition, an asset backed securities (ABS) fund is required to invest a minimum of 80% of their fund asset positions in securitized assets, i.e., asset backed securities.
 
7
BNP Paribas Documents, Background Information on suspension and reopening of ABS funds in August, available on the Internet at, https://​invest.​bnpparibas.​com/​sites/​default/​files/​documents/​5761.​pdf, accessed on Jan 20, 2021.
 
8
FSB, Global Monitoring Report on Non-Bank Financial Intermediation, 2019, January 19, 2020, available on the Internet at, https://​www.​fsb.​org/​wp-content/​uploads/​P190120.​pdf, accessed on September 22, 2020, page 17.
 
9
OFIs refer to those financial corporations whose primary activity is financial intermediation; i.e., entities that route resources to borrowers from lenders via auxiliary financial activities or their own account and are directly associated to financial intermediation. However, these corporations are not regarded as deposit acceptors (IMF 2004). OFIs include asset management companies; insurance corporations; factoring corporations, investment fund houses; finance; pension funds; securities dealers and leasing entities. We consider NBFCs as OFIs in India.
 
10
FSB, Global Monitoring Report on Non-Bank Financial Intermediation, 2019, January 19, 2020, available on the Internet at, https://​www.​fsb.​org/​wp-content/​uploads/​P190120.​pdf, accessed on September 22, 2020, page 14.
 
11
RBI Financial Stability Report, July 24, 2020, “Chapter II: Financial Institutions: Soundness and Resilience” available on the Internet, https://​www.​rbi.​org.​in/​Scripts/​PublicationRepor​tDetails.​aspx?​UrlPage=​&​ID=​1148, accessed on September 21, 2020.
 
12
Reserve Bank of India Web site, Frequently Asked Questions, Definition of NBFC, Jan 10, 2017, available on the Internet at, https://​www.​rbi.​org.​in/​Scripts/​FAQView.​aspx?​Id=​92, accessed on Jan 26, 2021.
 
14
The reduction in the NBFC ND SI category can be related to revised regulatory guidelines that required these entities to have a threshold asset size requirement INR 5 billion instead of the prior INR. 1 billion (Table 2) leading to disqualification of numerous NBFCs that were earlier granted status of NBFC ND SI.
 
15
Those NBFCs listed on the stock exchange are public-limited companies, privately owned are private limited, and government-owned are government companies.
 
16
MoneyControl, NBFCs laugh their way to the bank as rich investors try to cash in on IPOs, available on the Internet at, http://​www.​moneycontrol.​com/​news/​business/​ipo/​nbfcs-laugh-their-way-to-the-bank-as-rich-investors-try-to-cash-in-on-ipo-mania-2328453.​html, accessed on Jan 15, 2017.
 
17
RBI, Non-Banking Financial Institutions (NBFIs), available on the Internet at, https://​rbidocs.​rbi.​org.​in/​rdocs/​Publications/​PDFs/​0RTP241219FL760D​9F69321B47988DE4​4D68D9217A7E.​PDF, accessed on Sep 21, 2020, Page 101.
 
18
RBI Web site, SCB definition: “All banks included in the second schedule to the Reserve Bank of India Act, 1934. They are categorized into five different categories: (1) State bank and its associates, (2) Nationalized banks, (3) Private sector banks, (4) Foreign banks and (5) Regional rural banks”; available on the Internet at, https://​www.​rbi.​org.​in/​scripts/​PublicationsView​.​aspx?​id=​14655, accessed on Jan 28, 2018.
 
19
The Hindu, November 08, 2016, Demonetisation of Rs. 500 and Rs. 1000 notes: RBI explains, available on the Internet at, https://​www.​thehindu.​com/​news/​national/​Demonetisation-of-Rs.​-500-and-Rs.​-1000-notes-RBI-explains/​article16440296.​ece, accessed on September 25, 2020.
 
20
RBI Bulletin, Business in India: All Scheduled Banks and All Scheduled Commercial Banks, June 11, 2018, available on the Internet at, https://​rbi.​org.​in/​Scripts/​BS_​ViewBulletin.​aspx?​Id=​17609, accessed on July 14, 2018.
 
21
Chapter II: Financial Institutions: Soundness and Resilience Reserve Bank of India Publications, June 26, 2018, available on the Internet at, https://​rbi.​org.​in/​Scripts/​PublicationRepor​tDetails.​aspx?​UrlPage=​&​ID=​902, accessed on July 14, 2018.
 
22
Reserve Bank of India (RBI), Statistical Tables Relating to Banks in India, available on the Internet at, https://​dbie.​rbi.​org.​in/​DBIE/​dbie.​rbi?​site=​publications#!4, accessed on September 21, 2020.
 
23
Reserve Bank of India (RBI), Revised Prompt Corrective Action (PCA) Framework for Banks, available on the Internet at, https://​rbi.​org.​in/​scripts/​NotificationUser​.​aspx?​Mode=​0&​Id=​10921, accessed on July 25, 2018.
 
24
Non-bank credit comprises agriculture and allied activities, industry (micro and small, medium and large), services and personal loan.
 
25
The AMCs included here are financial institutions-sponsored, bank-sponsored and corporate-sponsored AMCs.
 
26
Reserve Bank of India, Financial Stability Report, 2013, 2014, 2015, 2020 available on the Internet at, https://​rbi.​org.​in/​Scripts/​FsReports.​aspx, and https://​rbidocs.​rbi.​org.​in/​rdocs/​PublicationRepor​t/​Pdfs/​0FSRJULY2020C084​CED43CD1447D80B4​789F7E49E499.​PDF, accessed on Jan 23, 2021, Page 46.
 
27
The upper limit of a banks direct exposure toward lending and investment activities of NBFCs is capped at 10% to 15% of the banks’ capital funds. This figure is arrived at according to the last audited financial statements. This upper limit pertains to an individual NBFC/ NBFC Infrastructure Finance Corporation/NBFC Asset Financing Corporation. RBI exposure limit to an individual NBFC, available on the Internet at, https://​www.​rbi.​org.​in/​scripts/​BS_​ViewMasCirculard​etails.​aspx?​id=​9875, accessed on Jan 19, 2018.
 
28
An AMC can hold a maximum exposure of 25–30% to the NBFC sector issuances. AMCs exposure to a single NBFC debt securities issuance is capped at 10–15% of the net asset value (NAV). Live Mint, SEBI relaxes debt fund exposure limit for housing finance companies, Aug 11, 2016, available on the Internet at, http://​www.​livemint.​com/​Money/​kJdEWM3z3hecPWSw​KMvZtK/​Sebi-relaxes-debt-fund-exposure-limit-for-housing-finance-co.​html, accessed on Jan 23, 2018.
 
29
MCLR definition is available on the Reserve Bank of India (RBI) Web site, https://​m.​rbi.​org.​in/​scripts/​FAQView.​aspx?​Id=​111, accessed on February 20, 2020. MCLR is deemed as the lowest interest rate offered by a lender such as a bank. MCLR is usually linked with the banks’ funding costs and repo rate. Thus, if there is slight upward or downward movement in the repo rate, it is likely to affect the bank lending rate at which a borrower borrows funds from the banks.
 
30
RBI, Financial Stability Report, July 2020, available on the internet at, https://​rbidocs.​rbi.​org.​in/​rdocs/​Publications/​PDFs/​0RTP241219FL760D​9F69321B47988DE4​4D68D9217A7E.​PDF, accessed on 21 September 2020, page 106.
 
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Metadaten
Titel
Shadow Banking and Non-banking Financial Companies in India: An Overview
verfasst von
Sankarshan Basu
Jaslene Bawa
Copyright-Jahr
2022
Verlag
Springer Nature Singapore
DOI
https://doi.org/10.1007/978-981-16-7668-0_10