India eases condition for shadow lenders

Updated August 20, 2019

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The non-banking finance companies, also known as shadow lenders, have been battling a credit crunch since 2018. — AP/File
The non-banking finance companies, also known as shadow lenders, have been battling a credit crunch since 2018. — AP/File

NEW DELHI: India’s non-banking financial firms and listed companies that issue debentures will no longer have to maintain a certain level of redemption reserves against them, the government said on Monday, in an effort to increase the availability of money for lending.

The non-banking finance companies, also known as shadow lenders, have been battling a credit crunch since IL&FS, or Infrastructure Leasing & Financial Services, collapsed in late 2018 amid fraud allegations.

The fall of IL&FS, a major player in the market, pushed up borrowing costs for rivals and forced them to pull back on lending, hurting the availability of consumer loans. This has curbed consumer spending and hit sectors such as real estate and automaking that are big drivers of consumer demand.

Published in Dawn, August 20th, 2019