Cast Adrift

The gap in India’s shadow banking segment is widening as institutional investors steer clear of commercial papers issued by smaller NBFCs and HFCs


"It’s the economy, stupid,” the now famous catchphrase coined by Bill Clinton’s campaign strategist James Carville in 1992 set the stage for his victory with the message: the economy matters. That underlying fact was a topic of tense discussion in India in 2018 in the form of the RBI versus the government saga. In a two-year-long battle, two RBI governors stepped down to make way for a handpicked North Block veteran. The new appointee was handed over a battered sector that was at the peak of its worst crisis. “Not a day passed in the past several months when we didn’t discuss or review NBFCs,” said the current RBI Governor, Shaktikanta Das, in an interview to Bloomberg, seven months after his appointment. This crisis also reflected in the new Finance Minister’s maiden Union Budget where the government decided to get banks to lend to the shadow-banking sector. But, what led to the crisis in the first place?